Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation
A practical guide for governments, informed by a country-lens review of leading practices
January 2019
Foreword
Global infrastructure gaps remain large, The reference tool is designed for use by policy- and tackling these gaps is a key priority makers and practitioners responsible for developing for governments in their quest to drive infrastructure projects. While it is aimed specifically at those involved in project preparation, it provides inclusive growth and poverty reduction. instructive lessons on a wider set of activities, including linkages with country-level infrastructure The Global Infrastructure Outlook report prepared plans and project pipelines, and their prioritisation by the G20 Global Infrastructure Hub (GI Hub) and screening, for a broader audience including other estimates the global infrastructure investment need government officials, financial institutions and private between 2015 and 2040 at US $94 trillion. Past infrastructure developers and contractors. studies have pegged project preparation costs at between 5-12% of investment needs and even if the The reference tool will be a useful aid for lower end of this range is considered, financing needs governments in their quest to improve project for project preparation translate to US $4.7 trillion preparation practices and their capacity for preparing over this period, or US $188 billion annually. Yet, the bankable and sustainable projects, and to usher scale and rigour of infrastructure project preparation in universal delivery of infrastructure services and needed to make projects bankable, sustainable and improved quality of living. implementation-ready remains inadequate and requires escalated attention.
The G20 Infrastructure Working Group (IWG) has “This tool builds upon identifiedimprovement in project development as the G20 Principles for one of three overarching pillars needed to develop the Infrastructure Project infrastructure as an asset class, along with improving Preparation Phase. the investment environment and promoting greater Structured processes and standardisation. The IWG also formulated the G20 mechanisms for effective Principles for the Infrastructure Project Preparation early-stage project Phase, aimed at improving assessments of project preparation are binding rationale, options appraisal, commercial viability, prerequisites for successful long-term affordability, and deliverability. infrastructure projects”.
This Reference Tool on Governmental Processes Mark Moseley Facilitating Infrastructure Project Preparation (or the Chief Operating Officer, ‘reference tool’ hereinafter) seeks to complement Global Infrastructure Hub global initiatives in this regard and is structured as a guidance tool to support governments in implementing infrastructure projects and in their “This reference tool seeks efforts to strengthen the building blocks for to facilitate governments project preparation. in their quest to build the scale and rigour of project The reference tool reinforces conceptual aspects development necessary to and approaches covering the formulation of realise their infrastructure infrastructure plans, project pipeline creation, development ambitions”. feasibility evaluation, project reviews and approvals, project marketing and stakeholder communication, Anand Madhavan with the focus of the tool being on the stages of Director Infrastructure project preparation which occur prior to project and Public Finance, CRISIL procurement. A country-lens approach, involving a Infrastructure Advisory review and profiling of project preparation processes in 15 countries (which can be found in Appendix A), was adopted to identify and incorporate leading practices and lessons learned contained herein.
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 1 Contents
1. Introduction 1.1. Background 7 1.2. Infrastructure project preparation context 8 1.3. About the reference tool 10 1.4. Methodology 12 1.5. Acknowledgments 14 2. Enabling environment for project preparation 2.1. Overview 15 2.2. Policy framework 16 2.3. Public institutional capacity 26 3. Financing project preparation 3.1. Overview 37 3.2. Project Development Funds 39 3.3. Project Preparation Facilities 45 3.4. Government budgets 49 4. Infrastructure planning and project prioritisation 4.1. Overview 51 4.2. Infrastructure planning 52 4.3. Translating infrastructure plans into a prioritised projects pipeline 58 5. Project feasibility, reviews and approvals 5.1. Overview 62 5.2. Project concept and pre-feasibility stage 64 5.3. Feasibility stage 68 5.4. Reviews, audit and approval 73 6. Project communication 6.1. Overview 76 6.2. Stakeholder engagement 77 6.3. Considerations in market sounding 86 Appendix A: Country cases 91 Appendix B: Detailed methodology for reference tool 254 Appendix C: Relevant literature 257 Appendix D: List of organisations contacted 266 Appendix E: Consultant team 270
2 | GLOBAL INFRASTRUCTURE HUB Executive Summary
Background Tackling the large global infrastructure gap remains The Global Infrastructure Hub (GI Hub) has led the a priority for governments to drive inclusive growth development of this Reference Tool on Governmental and reduce poverty. The Global Infrastructure Outlook Processes Facilitating Infrastructure Project Preparation report prepared by the Global Infrastructure Hub (hereinafter referred to as the ‘reference tool’) to (GI Hub) estimates that the global infrastructure support the operationalisation of the aforementioned investment needed between 2015 and 2040 is G20 Principles. approximately US $94 trillion. Past studies peg project This reference tool is intended as a guidance preparation costs at between 5-12% of investment document for governments and practitioners involved needs, and even if the lower end of this range is in infrastructure project preparation, and is built on considered, financing needs for project preparation a detailed country-lens review of project preparation translate to US $4.7 trillion over this period, or US $188 practices in 15 countries. The reference tool seeks billion annually. to address challenges faced by governments in early- In 2018, the G20’s Infrastructure Working Group (IWG) stage project preparation through providing guidance identified the key elements for infrastructure growth in five areas, as shown in the following diagram: under a strategic roadmap, “Developing infrastructure as an asset class”, organised under three overarching pillars, the first of which is improving project development. In July 2018, the G20 Finance Ministers and Central Bank Governors endorsed the G20 Principles for the Infrastructure Project Preparation Phase developed by the IWG.
Enabling environment for project preparation Policy framework and public institutional capacity (Chapter 2)
Financing project preparation PPFs | PDFs | Government budget (Chapter 3)
Infrastructure planning and project prioritisation Project Project Planning | Prioritised projects pipeline (Chapter 4) procurement implementation
Project feasibility, reviews and approvals Project concept and pre-feasibility | Feasibility | Reviews, audit and approval (Chapter 5)
Project communication Stakeholder engagement | Market sounding (Chapter 6)
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 3 Outline of guidance areas Financing project preparation Enabling environment for project preparation As noted, infrastructure project preparation costs A conducive enabling environment for infrastructure in developing countries typically range from 5-10% investment is often a key differentiator between of the total project investment, and about 3-5% of countries that successfully scale up infrastructure and project costs in developed countries. While financing those that face challenges in doing so, and nurturing for project preparation has, in the past, been largely such an environment is largely the responsibility of addressed through government budgetary allocations, governments. The reference tool identifies leading increasing use is now being made of national and practices in two dimensions of government action: sub-national Project Development Funds (PDFs), and of Project Preparation Facilities (PPFs) developed 1. A robust policy framework: that signals clarity, by the MDBs and other multilateral entities. Key consistency and stability of government actions, considerations for governments in utilising each of while providing for agility to adapt and manage these three financing sources are summarised below: changes in the wider infrastructure ecosystem. In developing such a framework, governments 1. Project Development Funds (PDFs): Many should: governments have set up PDFs as a means to provide dedicated financing and bridge capacity • Establish a stable policy and legislative gaps faced by GCAs in project preparation. framework guiding development and private PDFs can be set up at the national and sub- participation in infrastructure that is agile and national level, either with government funding responsive to tackle evolving infrastructure or structured so as to recover costs. They may development needs; have a thematic focus (e.g. climate mitigation) • Develop guidelines, standards and processes or a sectoral focus. Critical considerations in to make the policy framework actionable, together the creation of PDFs are summarised below: with an aligned cascading of policies at the sub- • Ensure clarity of PDF objectives, scope of national government and government contracting operation, and interface with GCAs; authority (GCA) level; and • Support PDFs with effective governance, • Formulate allied sector-specific policies as institutional capacity and sustainable financing; necessary to drive infrastructure project preparation. • Institutionalise project preparation financing support for sub-national governments; and 2. Well-governed public institutions: with a clear role, mandate, and commensurate capacity to • Develop allied mechanisms, standards and operationalise policy into effective and smooth processes for effective operationalisation. project preparation and implementation. 2. Project Preparation Facilities (PPFs): PPFs are Key ‘leading practices’ include the following: a response by the MDBs and other multilateral • Establish and empower centralised agencies entities to address the scarcity of bankable, to institutionalise project preparation capacity investment-ready project pipelines in many and standards; Emerging Market and Developing Economies (EMDEs), and to provide financing support • Create sector-specific agencies where investment for project preparation. Many of these PPFs and/or transformation needs are significantly have been set up with different arrangements large; and regional focuses. Apart from financing • Develop commensurate capacity and project preparation activities, PPFs provide mechanisms to address conflicts of interest; technical assistance and capacity building support. To effectively utilise PPFs, the following • Create distinct structures for preparing large considerations are crucial: complex projects; and • Alignment of government objectives with relevant • Build complementary capacity to equip GCAs PPF aims; with skills and capabilities to manage project preparation. • Seek support from PPFs for the upstream enabling environment and improving public investment efficiency; and
4 | GLOBAL INFRASTRUCTURE HUB • View PPF support as a ‘stepping stone’ to build • Update infrastructure plans periodically to reflect and accelerate local capacity creation, and not lessons learned and build credibility in planning; just as a financing mechanism. and
3. Government budgets: Notwithstanding the • Create linkages of the plan with downstream growth of PDFs and PPFs, a dominant portion actions, to operationalise the plans. of project preparation is financed by public 2. Translate these plans into a prioritised and spending from budgetary allocations of GCAs. actionable projects pipeline: Once long-term Even in Africa, where many PPFs are active, plans are in place, they should be translated into 70-80% of project preparation funding comes a credible and prioritised pipeline of programs from government budgets. Given the scale of and projects: budgetary spending on project preparation, governments should pay close attention to • Encourage GCAs to prepare master plans, improving the efficacy and impact of these which can serve as useful starting points to build expenditures. The following actions should a project pipeline database; be considered: • Create mechanisms to track and monitor projects • Direct a portion of budgets to project preparation of national and strategic importance; and while tracking expenditure and outcomes • Move to evidence-based analysis to prioritise continually; projects, including through the use of tools such • Implement GCA-level reporting and disclosure as the World Bank’s Infrastructure Prioritization on project preparation spending; and Framework.
• Set and enforce guidelines with which GCAs must Project feasibility, reviews and approvals comply to secure budgetary funding. Translating a concept into a bankable project requires Infrastructure planning and project prioritisation rigorous evaluation and appraisal of the project’s feasibility, and often requires a multi-stage evaluation, Well-planned and prioritised infrastructure investment starting with a strategic case or concept definition, improves productivity, engenders competitiveness and moving through to pre-feasibility assessment and and contributes to long-term sustainable economic detailed feasibility evaluation. A structured approach growth. Effective project preparation starts with to project feasibility evaluation typically involves three putting in place upstream mechanisms to formulate steps: long-term infrastructure plans, and translating those plans into prioritised project pipelines. 1. Early-stage pipeline screening and pre-feasibility assessment: Key actions required by central 1. Formulate medium- and long-term infrastructure government agencies and GCAs at this stage plans: This involves a systematic assessment include the following: of critical infrastructure gaps, identification of priorities to drive socioeconomic transformation, • Strengthen planning processes and capacity of setting actionable goals around these priorities, GCAs to translate development priorities into well- and identifying projects to realise the agreed-upon scoped project concepts; goals. The formulation of medium- and long-term • Implement structured processes and guidelines plans to drive greater focus and commitment to for early stage screening, project identification infrastructure development priorities calls for the and scoping; and following set of actions from governments: • Create institutional support for independent • Prepare long-term infrastructure plans that unbiased pre-feasibility studies and early stage translate a systematic baseline assessment into project evaluation. a committed articulation of priorities, goals and pipeline of projects;
• Anchor accountability for infrastructure planning within capable and empowered public institutions;
• Cascade infrastructure planning down to the level of GCAs and sub-national governments;
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 5 2. Rigour in feasibility evaluation: This step appropriate communication actions to inform and involves a detailed evaluation of the project’s engage them; and fosters a supportive environment feasibility and seeks to comprehensively facilitate through the course of project preparation and decisions regarding the investment and financing implementation. Governments should: of projects. The following elements should be 1. Formulate and deliver a stakeholder considered: engagement action plan to: • Governments should develop harmonised • Map stakeholders and their preferences, and standards and guidelines for quality feasibility assess the intensity of communication efforts evaluations and build capacity in GCAs to perform required; them, using external consultants as appropriate. • Assess stakeholders’ behaviour, influence • While evaluating project feasibility, tools such as and importance while identifying their needs, the World Bank’s PPP Project Screening Tool can expectations and concerns; and help in building comprehensiveness of evaluation and suitability for implementation using the PPP • Develop and deliver an appropriate model of procurement. communication plan to address the various stakeholder groups. • Governments need to strike the right balance between qualitative and quantitative approaches 2. For potential PPP projects, evaluate market in determining which model of procurement to interest early in the project preparation phase use, especially in the early stages where there is through the market sounding of projects to limited data to inform assumptions, even though potential developers and investors. To prepare for they ultimately seek to integrate comprehensive market soundings, the GCA should: Value for Money analyses into overall public • Identify and engage as wide a set of potential investment planning. bidders as possible; and 3. Periodic review and approvals: Mechanisms • Identify positive aspects of the project that to consistently build robust project reviews position it as an attractive investment opportunity, and appraisals in a multi-stage manner can and position the GCA as a credible partner in the help to avoid missing key requirements early PPP transaction. on and getting blindsided by challenges later in the project preparation process. The following Concluding remarks elements should be built into project reviews. The reference tool synthesises lessons and • Implementing well-defined and time-bound practices from global, national, and sub-national level work flows to balance rigour and efficiency experiences to support governments in making project considerations; preparation processes more effective. The reference tool has been finalised with inputs and contributions • Embedding a process audit into project from government officials in over 15 countries, preparation to build transparency, accountability multilateral agencies, and private organisations, and efficiency; and who have helped to inform its final development. • Ensuring that key stakeholders are involved The reference tool blends conceptual inputs with during project preparation and reviews. country case examples and best practices, distilled Project communication from the country-lens reviews undertaken during the preparation of this tool, and also includes a Stakeholder engagement during infrastructure referencing of other tools and frameworks used project preparation assumes tremendous significance in project preparation. given the multi-faceted nature of large infrastructure projects and the complex stakeholder interfaces The reference tool is designed to complement the G20 they tend to cut across. Communication during the IWG Principles for the Infrastructure Project Preparation course of infrastructure project preparation should be Phase and the MDB Guidance Note on Project viewed as a strategic action that takes into account Preparation Facilities (PPF): Structure and Operations. the importance and disposition of all key stakeholder groups towards the project; tailors timely and
6 | GLOBAL INFRASTRUCTURE HUB INTRODUCTION
1. Introduction
1.1. BACKGROUND
The G20 has had a long-standing commitment to It has led the development of this Reference Tool promoting sustainable infrastructure development on Governmental Processes Facilitating Infrastructure as a key mechanism for supporting economic growth, Project Preparation (hereinafter referred to as ‘reference in both developed countries and emerging markets. tool’). The information contained in both the G20 Principles for the Infrastructure Project Preparation As part of this commitment, the G20 Infrastructure Phase and the MDB’s Infrastructure Cooperation Working Group (IWG) identified, in 2018, the key Platform was used to inform the preparation of elements for infrastructure growth under a strategic this reference tool, and the tool has been designed roadmap, “Developing infrastructure as an asset class”, to support the operationalisation of the project organised under three overarching pillars: (i) improving preparation principles endorsed by the G20. project development; (ii) improving the investment environment for infrastructure; and (iii) promoting greater This reference tool follows an intermediate publication, standardisation. The first of these pillars, i.e. improving the Initial Report – National1 processes facilitating project project development, is particularly crucial and preparation illustrated by country examples, published by involves enhanced efficacy of upstream activities in the GI Hub in August 2018, which provided a high-level the infrastructure project lifecycle to make projects perspective on the current global infrastructure project ‘procurement-ready’. preparation landscape, its challenges and possible approaches to solutions. It distilled lessons learned for In July 2018, the G20 Finance Ministers and Central effective project preparation processes from national Bank Governors endorsed the G20 Principles for the (and sub-national) perspectives and was intended to Infrastructure Project Preparation Phase developed provide a holistic assessment of important leading by the IWG, which identifies five principles to be practices from the lens of country-level governance considered while creating infrastructure project and implementation. pipelines, namely project rationale, options appraisal, commercial viability, long-term affordability, and This reference tool is intended as a guidance deliverability. The G20 has also welcomed the work document for governments and practitioners involved of the Multilateral Development Banks’ (MDB) in infrastructure project preparation. It is built on Infrastructure Cooperation Platform, which has a detailed review of critical success factors underlying prepared guidance on good practices to inform MDB successful project preparation, which have been approaches on and efficiency of support for project distilled from an extensive analysis of prevailing preparation. leading practices globally through a country-lens perspective. The reference tool is designed to be The G20 has recognised that, for these steps to be complementary to the G20 IWG Principles for the effective, a robust institutional framework is necessary Infrastructure Project Preparation Phase and the to build the foundation of quality project preparation. Guidance Note on Project Preparation Facilities (PPF): While governments the world over have attempted Structure and Operations prepared under the Project to strengthen their project preparatory activities by Preparation Workstream of the MDB Infrastructure using frameworks, specific guidance, structured Cooperation Platform, so that national governments processes, capacity building initiatives and financing may be better placed to utilise the Principles. mechanisms, there is a strong need for continued support in this regard.
The Global Infrastructure Hub (GI Hub), created as an initiative of the G20 to facilitate knowledge sharing and multi-institutional coordination to help increase the flow and quality of global infrastructure development, is committed to support initiatives to build capacity for effective infrastructure project preparation. 1 Available at https://www.gihub.org/resources/publications/initial- report-national-processes-facilitating-project-preparation/. Title of final reference tool since changed to governmental processes, instead of national processes, to take sub-national processes into account.
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1.2. INFRASTRUCTURE PROJECT While tackling the infrastructure gap requires PREPARATION CONTEXT prioritised project pipelines and well-prepared, bankable projects, capacity to drive effective project Global infrastructure needs are massive preparation at the national and sub-national levels is The GI Hub’s Global Infrastructure Outlook estimates also crucial and has been woefully inadequate. that US $94 trillion will be needed by 2040 to meet In most cases, demand for infrastructure does global infrastructure needs. In terms of regions, Asia not directly result in project implementation and will require the lion’s share of this investment, with service delivery – an array of inhibiting factors, over half of the global investment needed, followed including unclear policies, poor project fundamentals, by America, Europe and Africa. The roads and power inadequate risk-adjusted returns, and lack of sectors will continue to demand the highest share of institutional capacities to develop and deliver the investment need, followed by water and other forms of project, often derail implementation. transport. Project preparation, which spans activities from Meeting these investment needs will entail increasing conceptualisation and feasibility analysis to deal the overall average spend on infrastructure from 3.0% structuring and transaction support, is integral to of global GDP at present, to 3.5% of global GDP by creating bankable projects. Inadequate support at the 2040, and considerably more as a percentage of GDP project preparation stage can result in critical projects in many developing countries. However, with global being scrapped prior to implementation or increasing public debt having grown sharply in the last decade the cost of implementation to a prohibitive degree. (doubling from 2008-levels for most regions in the Quality project preparation is thereby an essential world), governments are fiscally stretched to be able step to translate the demand for infrastructure into to make the sharp increment in investment required. effective project development and service delivery. Fostering and tapping private sector investment into infrastructure, including through the public-private Yet, despite the critical need for project preparation, partnership (PPP) model, to augment resources and many countries, especially many emerging markets complement public spending has therefore become and developing economies (EMDEs), are often extremely critical. Refer to Exhibit 1.1. ill-equipped to translate their infrastructure gaps into well-identified and prioritised project pipelines. Even when such project pipelines have been identified, the capacity to undertake follow-up activities in upstream project preparation, in terms of policy, institutional
Exhibit 1.1 Infrastructure requires massive investment in the context of growing fiscal challenges
Global infrastructure need by 2040 - US $94 trillion Government debt to GDP – Global trends
Africa Oceania Europe 6% 98 2% 80 16% 79 74 67 55 57 43 30 25
America 22% Africa Asia & Europe Middle Western Pacific East Hemisphere Asia 54% 2008 2018
Source: Global Infrastructure Outlook, GI Hub Source: International Monetary Fund
8 | GLOBAL INFRASTRUCTURE HUB INTRODUCTION
strength, and frameworks and processes, are often There have also been several MDB-led efforts inadequately developed. As a result, infrastructure towards creating project preparation facilities (PPFs), needs are not translated into bankable projects that especially in Asia and Africa, that have sought to can deliver infrastructure services efficiently. address the capacity and financing challenges of project preparation. Initiatives include the creation This capacity gap is further highlighted as of technical templates or checklists on specific governments seek to attract private infrastructure aspects of project preparation (e.g. The Sustainable investment, with significant differences emerging Infrastructure Foundation’s SOURCE2, the World among countries both regionally and in terms of Bank’s PPP Screening Tool3 etc.). income groups, regarding the maturity of project preparation processes.
Project preparation is thus becoming an increasingly critical enabler of infrastructure development and as 2 Available at https://public.sif-source.org/ noted earlier, has been identified as a key pillar in the 3 Available at https://pppknowledgelab.org/tools/tools-assess- G20’s strategic roadmap to develop infrastructure whether-implement-project-ppp#ppp-screening-tool as an asset class.
Exhibit 1.2 Project preparation – Global and regional deficit
A study conducted by the World Bank Group The top five ranked countries under the framework (WBG)4, the Procuring Infrastructure PPP Report 2018, are the UK (96), Australia (94), Lithuania (92), assessed the strength of regulatory frameworks Canada (90) and Colombia (90). and institutional arrangements The report clearly establishes that the gap in to prepare, procure and manage infrastructure project preparation is larger in lower-income projects in 135 economies. This study highlights countries. On the regional front, while high-income significant regional and income group differences OECD countries scored an average of 65 on project in the maturity of project preparation activities. preparation, regions such as Latin America and Among high-income countries surveyed, project the Caribbean received only the median score of preparation activities received an average score 50, while South Asia has shown improvement of 63 (out of 100), lower than the scores for with a slightly higher score of 57. Regions such procurement, contract management and the as Sub-Saharan Africa and the Middle East and management of unsolicited proposals. Middle- North Africa scored considerably lower than their income and lower-income countries received lower peers for project preparation. However, there are scores on average for project preparation, ranging some exceptions (i.e. India, South Africa and the from 48 (out of 100) for upper-middle income Philippines, who score higher in their income countries, 44 (out of 100) for lower-middle groups). income countries, to 39 (out of 100) for low-income economies. 65 63 57 50 50 48 42 44 41 39 40
ECA5 EAP LAC MENA OECD SAR SSA High Upper-middle Lower- Low High income income middle income Income income
4 Procuring Infrastructure Public-Private Partnerships Report. 2018: http://pubdocs.worldbank.org/en/256451522692645967/ pdf/PIP3-2018.pdf 5 ECA – Europe and Central Asia; EAP - East Asia and Pacific; LAC – Latin America and Caribbean; MENA – Middle East and North Africa; OECD – Organisation for Economic Co-operation and Development; SAR – South Asia; SSA – Sub-Saharan Africa
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1.3. ABOUT THE REFERENCE TOOL The reference tool accordingly does not cover aspects relating to “project transacting” (i.e. the procurement 1.3.1. Objectives and scope process), given that a number of tools are already The reference tool is intended to provide guidance available to support this process. Also, much of the on early-stage activities within the infrastructure challenge occurs prior to projects reaching the point of project development cycle, and the enablers required procurement. This reference tool accordingly seeks to to create a conducive environment to prepare synthesise lessons and practices from global, national, sustainable, bankable and procurement-ready and sub-national level experiences in these areas to infrastructure projects. support governments in making project preparation more effective. The tool specifically seeks to address the challenges faced by governments in early stage project 1.3.2. Organisation and coverage preparation that constrain their ability to prepare The building blocks and organisation of this reference well-structured and bankable infrastructure projects. tool are captured in Exhibit 1.3 below. This includes aspects relating to (i) infrastructure planning, project screening, and prioritisation; (ii) The reference tool is organised in six chapters that project concept definition and feasibility evaluation provide guidance on leading practices with respect covering outline business case (OBC) studies, pre- to each of these building blocks of early-stage project feasibility studies, and detailed feasibility studies; preparation, as described below: and (iii) project reviews and approvals to initiate • Chapter 1: Introduction (this chapter) details the project procurement. In addition, a conducive enabling background and context underlying this reference environment, in terms of policy support, capacity tool, its scope and coverage, and a snapshot of the of public institutions, and effective mechanisms for methodology used for its preparation. stakeholder engagement, is also critical and forms the focus of this reference tool.
Exhibit 1.3 Infrastructure project lifecycle, enablers and focus modules of this reference tool
Enabling environment for project preparation Policy framework and public institutional capacity (Chapter 2)
Financing project preparation PPFs | PDFs | Government budget (Chapter 3)
Infrastructure planning and project prioritisation Project Project Planning | Prioritised projects pipeline (Chapter 4) procurement implementation
Project feasibility, reviews and approvals Project concept and pre-feasibility | Feasibility | Reviews, audit and approval (Chapter 5)
Project communication Stakeholder engagement | Market sounding (Chapter 6)
10 | GLOBAL INFRASTRUCTURE HUB INTRODUCTION
• Chapter 2: Enabling environment for project • Chapter 6: Project communication addresses preparation discusses the ingredients needed the critical aspect of comprehensive stakeholder to create a conducive climate for infrastructure management and adequate market sounding development, in terms of policy support and public prior to project procurement. It recognises that institutional arrangements necessary to drive even well-structured projects can fail if diverse project preparation. This chapter also seeks to stakeholder inputs and concerns are not adequately identify the specific policy and institutional enablers addressed through the various stages of the project necessary to attract and scale-up private sector development lifecycle. This chapter provides a participation in infrastructure. framework and tools for mapping and managing stakeholders through the various stages of project • Chapter 3: Financing project preparation preparation. Further, it also provides guidance on addresses the critical aspect of financing for the criticality and approach to expose projects to project preparation and identifies the approaches a broad-based market sounding, and to elicit and mechanisms that can be adopted to identify, and factor in feedback on the acceptance of the ring-fence and direct financing towards various proposed project design, scope and structure. aspects of project preparation. The chapter discusses the role of MDB-led initiatives to set In addition to the main guidance provided through up Project Preparation Facilities (PPFs) and these chapters, the reference tool provides useful their role in supporting governments in project additional information in the form of the following preparation. The chapter also provides guidance appendices: on the structures and use of dedicated Project • Appendix A: Country cases presents an overview Development Funds (PDFs), which have become of the infrastructure project preparation landscape increasingly popular, especially in supporting in 15 diverse countries from across the globe. The project preparation for projects being executed cases start with a snapshot of leading practices using the PPP model. However, project preparation in these chosen countries and trace the project for infrastructure is often driven by government preparation landscape in these countries in terms budgets through government contracting agencies of key policies, institutions and important project (GCAs) and this chapter also discusses approaches preparation outcomes achieved. In addition, to improve effectiveness of such budgetary Appendix A includes: financing of project preparation. ––Project cases, which take select infrastructure • Chapter 4: Infrastructure planning and project project case studies from around the world prioritisation provides guidance on formulating and seek to distil lessons that governments infrastructure plans and translating them into can draw from these experiences in terms of prioritised project pipelines. The chapter discusses practices for effective project preparation. These the approaches and processes adopted by cases are interspersed with information on their governments in preparing multi-year infrastructure development costs, timelines and underlying plans. It also details the mechanisms and tools practices and seek to help illustrate application available to move from aggregate plans to a of the concepts covered in the main chapters screened list of projects, which can then be of the reference tool. evaluated for implementation. ––Tools and frameworks, which summarise the • Chapter 5: Project feasibility, reviews and scope and functionality of some useful guidance approvals discusses the typical steps involved frameworks and tools already in use across in moving from a pipeline of identified projects countries globally. These tools and frameworks through project preparation review and evaluation, have been selected based on a review of starting with project concept definition, outline country-level practices and when applied, taking business case (OBC) or pre-feasibility, and country-specific contextual factors into account, detailed feasibility stages. The mechanisms to can potentially help governments to accelerate impart independence and rigour in the review and capacity development for project preparation. appraisal of projects through the various stages of feasibility evaluation are also discussed in The detailed methodology is presented in Appendix this chapter. B, along with additional relevant reading and a list of organisations which supported the preparation of this tool in Appendices C and D respectively. The consultant team is presented in Appendix E.
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1.4. METHODOLOGY
A snapshot of the methodology involved in preparing this reference tool is captured in Exhibit 1.4 and further explained below. Appendix B of the reference tool sets out the detailed methodology.
Exhibit 1.4 Infrastructure project lifecycle, enablers and focus modules of this reference tool
Methology snapshot
Phase 1 • Emerging themes, lessons • Literature research GLOBAL OVERVIEW PHASE 1 REPORT ON • Input to G20 IWG • Review of project REPORT METHODOLOGY preparation practices • Clarify methodology for in 5 countries reference tool
Country selection Quantitative criteria • Guidance and leading Phase 2 Regional, income balance REFERENCE TOOL practices Qualitative factors Country-lens review and ON PROJECT • Country, project case studies research in 15 countries Review of landscape PREPARATION and leading practices • Tools and frameworks Research | Interviews
The preparation of the reference tool was conducted 3. Preparation of Global Overview Report: The in two phases: Global Overview Report, published as the Initial Report – National processes facilitating project Phase I Global Overview Report and finalising the preparation illustrated by country examples by methodology for reference tool preparation GI Hub in August 2018, provided a high-level Phase I involved the following steps: perspective on the current infrastructure project preparation landscape, its challenges, 1. Desk research on infrastructure project and possible approaches to solutions, building preparation and review of best practices: on steps 1 and 2 above. It reviewed leading Existing literature and information on practices and distilled lessons for effective infrastructure project preparation and best project preparation processes from national (and practices were reviewed to develop an sub-national) perspectives from the five countries understanding of the global guidance currently and provided a holistic assessment of important available and the gaps. This included a review of leading practices from the lens of country-level frameworks available from MDBs, activities of governance and implementation. external project preparation facilities (PPFs) and overall infrastructure investment needs and gaps 4. Preparation of the Phase I Report: The Phase I globally. Report built on the findings from the preparation of the Global Overview Report and clarified the 2. Review of the project preparation landscape and detailed methodology for Phase II of the exercise, practices in five countries: This involved a review i.e. the preparation of the reference tool. of the project preparation landscape in terms of enabling policies, institutions and frameworks and processes in place for infrastructure project preparation in five countries, namely Mexico, the Netherlands, South Africa, the Republic of Korea, and the United Kingdom.
12 | GLOBAL INFRASTRUCTURE HUB INTRODUCTION
Phase II country-lens review countries was refined to provide adequate coverage across regions and income groups, to Phase II involved the following steps: ensure greater adaptability of the reference tool. 1. Selection of countries: The identification of • Qualitative factors: The shortlisted countries countries for review for the preparation of the from Stage I were reviewed based on the reference tool was done through the application uniqueness of programs, projects, processes, and of the following filters: elements of good practices in project preparation, • Quantitative criteria and regional and income to identify the final list of countries, providing assessment: The quantitative framework for a balance of countries across income, applied a two-factor criteria for the shortlisting demographics and geographic regions. of potential countries: i) Country rank on Pillar 2: Fifteen countries were selected following this Infrastructure (Global Competitiveness Index, 2017) process, namely Australia, Brazil, Canada, Chile, and ii) Country score on Pillar 1: Project Preparation China, India, Indonesia, Kenya, Mexico, the (World Bank’s Procuring Infrastructure Public-Private Netherlands, the Philippines, Rwanda, South Africa, Partnerships, 2018). The first level of shortlisted the Republic of Korea, and the United Kingdom.
Exhibit 1.5 Framework for country selection
2. Research: Following the selection of countries, a detailed review of the project preparation landscape and practices for each of these countries was completed to identify leading practices and lessons to be distilled to develop the reference tool. The research was conducted along eight themes, identified below:
Exhibit 1.6 Themes for country-lens research
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3. Consultation interviews: The research stage was 1.5. ACKNOWLEDGMENTS followed by stakeholder interviews to validate The GI Hub has developed the reference tool under country profiles and case studies. The interviews its mandate to develop and promote leading practices were also used to capture qualitative insights on in global infrastructure development. country-level practices and to distil inputs for the reference tool in terms of key leading practices. The GI Hub engaged CRISIL Risk and Infrastructure Solutions Limited (CRIS), a leading infrastructure 4. Creation of reference tool: As a final step, the consulting firm and a subsidiary of CRISIL Limited, reference tool was compiled. The guidance in one of the world’s foremost providers of credit ratings, the chapters has been structured taking into advisory and research, and a 100% subsidiary of S&P account real experiences from across the globe Global. CRIS led the preparation of the reference tool, and feedback from GCAs and other stakeholders. with close engagement with the GI Hub team, led by In addition, as noted above, the reference tool has Morag Baird and Stephanie Barker. benefitted from the material contained in both the G20 Principles for the Infrastructure Project The reference tool also incorporates contributions Preparation Phase and the MDB’s Infrastructure from various governments, government agencies, Cooperation Platform, with the tool being designed multilateral agencies, and private organisations, who to support the operationalisation of the project took time to assist the project team in collecting data, preparation principles endorsed by the G20. While preparing case studies and providing commentary detailed country and project cases studies are on issues related to infrastructure project preparation. provided as a separate section, these have also The primary data gathering was supported by a full been interspersed in the main chapters, along literature review of existing leading practices on the with the guidance material, to provide relevant topic of infrastructure project preparation, as well as practical insights for better readability and other unpublished guidance and inputs provided by practical application. GI Hub. As noted, this included both the G20 Principles for the Infrastructure Project Preparation Phase and the MDB’s Infrastructure Cooperation Platform.
Support and contributions from other international and bilateral organisations have also informed the development of the reference tool, most notably from the World Bank, and other such institutions.
The reference tool has been finalised with inputs and contributions from government officials in over 15 countries, who have helped to inform the final development of this product.
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2. Enabling environment for project preparation
2.1. OVERVIEW
Globally, governments are accountable for the Stable policy and capable institutions are foundational development of infrastructure (both economic requirements to support effective infrastructure and social) and the delivery of basic services in an project preparation and implementation, and have affordable and inclusive manner. This is irrespective become particularly important as governments of whether such infrastructure is financed, created increasingly look to attract private investment. and managed by public authorities, or with the The implementation of infrastructure projects through involvement of the private sector through public- the PPP model is becoming increasingly necessary private partnerships (PPPs). and is being driven by a need to (i) bring in efficiency gains, know-how and competition benefits; (ii) tap Nurturing a conducive enabling environment for external financing resources given fiscal pressures infrastructure investment is largely the responsibility and constraints in public investment; and (iii) separate of governments (both national and sub-national). It regulator-manager roles in infrastructure delivery for is often a key differentiator between countries that greater accountability. successfully scale up infrastructure and those that face challenges in doing so. Projects developed using the PPP model require significant additional evaluation and analysis in 1. In the context of infrastructure projects, an terms of viability, bankability, balanced risk allocation, effective enabling environment comprises two contractual commitments of both parties, value for key ingredients: A robust policy framework that money delivered by the project, and the assessment facilitates clarity, consistency and stability of of fiscal commitments and contingent liabilities of government actions, while providing for agility the government. to adapt and manage changes in the wider infrastructure ecosystem. This covers sector- While a conducive enabling environment is equally agnostic cross-cutting policies or legislation (for important for projects implemented in a conventional instance, public procurement legislation, enabling mode with public investment, project preparation is policy or legislation defining the boundaries significantly more complex in a PPP arrangement, and scope of PPP projects in infrastructure), or which makes the underlying enabling environment sector-specific enabling legislation underlying the and stakeholder involvement even more important. provision of essential infrastructure services (for instance, electricity sector legislation, urban transport policy), including in water supply, This chapter addresses the aspects of enabling electricity, public transport etc. environment for project preparation in two parts:
2. Well-governed public institutions with a clear • Policy framework (Section 2.1) role, mandate, and commensurate capacity • Public institutional capacity (Section 2.2) to operationalise policy into effective project preparation and smooth implementation. These institutions have to be set up under both the national and sub-national governments in line with the country’s constitution. Within the boundaries allowed by the constitution, this could cover different institutional models. For instance, some countries have sought to create centralised agencies mandated to catalyse project preparation at the national level, say, under the ministry of finance, or in a decentralised manner, where capacity building efforts for improving project preparation are focused on line departments and GCAs.
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2.2. POLICY FRAMEWORK
2.2.1. Summary 2.2.2. Guidance Infrastructure projects typically involve large, upfront investment commitments with service delivery and Key elements of guidance under policy future revenues potentially impacted by a variety framework are summarised below: of risk factors during the course of the project’s full A. A clear policy and legislative framework lifecycle. signals government commitment to Other things remaining equal, infrastructure infrastructure development. investments are therefore relatively risky. For instance, B. While legal and policy frameworks ought to in urban water supply projects, delays in the provision provide stability, they need to be agile and of targeted household connections in a timely manner, designed to evolve to meet the ever-changing or, even when the construction phase is completed needs of infrastructure development. well on time, user resistance and political reluctance to effect tariff increases, can lead to a slower than C. Follow-up guidelines, standards and expected increase in revenues. This could impact processes are key to make policy actionable. service delivery (by constraining resources needed D. An aligned cascading of policies and to operate and maintain the network), which, in turn, legislation across the national and sub- can further accentuate user dissatisfaction and national levels is important. reluctance to pay. E. Sector-specific legislation or policies may also The ability of governments to mitigate risks, as be necessary to drive infrastructure project illustrated above, is key to ensure the efficient preparation, in addition to cross-cutting use of public investments and attracting private policies. participation in infrastructure projects. A robust policy framework provides a strong signal of the F. Adapting and replicating contextually government’s recognition of these risks, as well as relevant policies from global experience can its commitment to allay concerns that citizens, accelerate capacity creation for infrastructure investors and private developers may have. It is not development. surprising that many countries, in the early stages of scaling-up infrastructure, tend to formulate an infrastructure or PPP legislation or policy to reiterate this commitment and provide assurance to the concerned stakeholders.
In larger countries, especially those with a federal structure, an aligned cascading of policies to sub- national governments is critical. Further, in addition to cross-cutting policies to create the enabling ecosystem, sector-specific policies and legislation are also often necessary to support infrastructure development and effective project preparation.
Finally, stand-alone policies or legislation are a necessary condition but not sufficient. They need to be followed up with a web of guidelines, regulations, standards and enforcement capacity, coupled with capable and empowered institutions, to operationalise policy intent and to translate the government’s vision into action.
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A. A clear policy and legislative framework Facilitate private participation and PPPs: signals government commitment to infrastructure PPP laws and policies provide an overarching enabling development. framework to provide a clear institutional framework At a fundamental level, a robust policy framework for to develop, procure and implement infrastructure infrastructure should tackle the following imperatives: using the PPP model. They define competent authority(ies) responsible for project preparation Set priorities and aspirations: and implementation, while clarifying investment Governments need to articulate, in clear terms, their targets, and the types of PPP envisaged. They define focus areas, aspirations and shifts in policy with respect competitive procurement terms and conditions, as to infrastructure development. These are typically well as mechanisms for the treatment of unsolicited influenced by socioeconomic development priorities, proposals. They allow for other enabling requirements political commitments made, and outcomes of mid- necessary to implement PPP projects, including, for to long-term planning processes. example, a harmonised approach to deal with exits For instance, the Republic of Korea has prepared five-year and terminations and enabling requirements like economic development plans since 1962 that have outlined lender step-in rights. infrastructure development priorities and the change in A UNESCAP6 study of 42 countries in the Asia-Pacific these over the decades. Early infrastructure priorities were found that over 40% of the countries had enacted PPP driven by the need to facilitate industrialisation, including, legislation, while another 31% of countries had formulated for instance, development of the Seoul-Busan expressway. PPP guidelines. In other words, over 71% of countries Since the mid-1990s, there has been a shift towards rational surveyed had a PPP law or guidelines in place. The World decision-making, as reflected in the increased adoption of Bank reports that over 45 countries7 have enacted some several tools and frameworks, including Total Project Cost form of legislation with the aim of fostering private Management (TPCM), Pre-Feasibility Studies (PFS), and investment in infrastructure. Refer to Exhibit 2.1 for Value-for-Money, that have since underpinned infrastructure a summary of salient aspects of infrastructure and PPP decisions in the country. legislation and policy in select countries.
Clarify accountability and accompanying resource While a PPP legal enactment is seen to provide allocation: a stronger basis than a PPP policy, which will provide The policy framework should define accountability investors with more certainty and reduce the risk for various aspects of infrastructure provision, of entering into a new market, PPP policies tend to supported by commensurate financial and provide relatively greater flexibility, which may also functional empowerment for the institutions that be necessary in the early stages of an infrastructure are mandated with infrastructure development and PPP program. For instance, while countries like the service provision. In particular, policies to facilitate Republic of Korea and South Africa have enacted PPP the clear demarcation of responsibilities at different laws, other countries, like the Netherlands and the UK, levels of government (national, provincial, local), and do not have legislation but instead have implemented within various government authorities, significantly well-articulated and robust policies and guidelines. improve the efficacy of governments in addressing infrastructure deficits. From an investor’s standpoint, while specific enabling laws or policies on the government’s approach to Inadequate provision of basic services, including water PPPs are important, investors often look to the wider supply and sanitation, is often attributed to diffused web of policies to assess if the other two imperatives accountability among different levels of government, listed above are addressed, and if sectoral policies weak decentralisation efforts and inadequate provide assurance and authorisation for undertaking empowerment of local governments. an infrastructure project with private capital.
6 https://www.unescap.org/sites/default/files/PPP%20Policy-Legal- Institutional%20Frameworks_2017.pdf 7 https://ppp.worldbank.org/public-private-partnership/legislation- regulation/laws/ppp-and-concession-laws
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LEGISLATION OR POLICY: The Netherlands’ MIRT policy framework and South Africa’s PFMA legislation
The Netherlands’ Ministry of Infrastructure and South Africa has a comprehensive legislative Water Management (MIWM) oversees the policy, framework for infrastructure procurement in the implementation and inspection of infrastructure form of the Public Finance Management Act 1999 development in the Netherlands. To aid with (PFMA). The PFMA seeks to regulate financial the development of policies, the MIWM houses management in the national government and seperate directorate-generals, responsible for provincial governments; to ensure that all designing overarching policies for development in revenue, expenditure, assets and liabilities of areas of mobility, water management, aviation and those governments are managed efficiently and maritime affairs and the environment. For large effectively; and to provide for the responsibilities infrastructure projects, the MIWM has adopted a of persons entrusted with financial management unique collaborative approach, namely The Multi in those governments. It forms an overarching Year Programme for Infrastructure, Spatial Planning framework for government spending, including in and Transport (MIRT) framework. MIRT comprises infrastructure. Regulation 16 of the PFMA governs infrastructure projects and programs in which the infrastructure PPP projects. This regulation takes national and regional governments collaborate to the user through the components of the regulation find a common solution to specific problems, after and explains how it applies to the distinct conducting analysis from different perspectives phases of the PPP project cycle, from inception and development objectives. MIRT projects can to the management of the PPP agreement. The be either implemented through public financing or South African National Treasury’s PPP Manual through PPPs on a Design-Build-Finance-Operate- complements the provisions of the PFMA. The Maintain (DBFOM) basis. Each year, the MIRT is PPP Manual is issued as a National Treasury PPP presented to the Lower House as an appendix Practice Note in terms of the PFMA, along with to the budget of the MIWM and this provides the Standardised PPP Provisions, issued as National necessary political and fiscal commitment to the Treasury PPP Practice Note Number 01 of 2004, MIRT. The MIRT program has rules, procedures and and Standards for Infrastructure Procurement and a framework to direct how a project initiative that Delivery Management, effective from 2016. South needs state funding should be developed and how Africa’s legal and policy framework has helped to decisions on project initiatives should be made. crowd-in significant levels of private investment in infrastructure, with South Africa planning and executing projects exceeding ZAR 300 billion (US $22 billion) annually.
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Exhibit 2.1 Country lens - National level PPP policies and legislation
COUNTRY CONCESSION LAW PPP LAW/ACT PPP GUIDELINES
Australia National PPP Policy and Guidelines
Brazil Administrative / Sponsored PPP Law Concessions Investment Partnership Public Service Concessions Program
Canada Government Contracts Guidelines to Implementing Regulations SOR/87-402, 2018 Budget 2011 Direction on Public-Private Partnerships
Chile Law and Regulation of Concessions of Public Works
China Circular of the General Office of the State Council on Guiding Opinion on Promoting the Public-Private Partnership Mode in the Public Service Fields
Kenya PPP Act 2013
India Guidelines on Formulation, Appraisal and Approval of Central Sector PPP Projects
Indonesia Government Goods and Presidential Regulation Services Procurement Policy No. 38 of 2015 concerning (LKPP) Regulation No. 19 of Cooperation Between 2015 Government and Business Entities in Procurement of Infrastructure
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Exhibit 2.1 Country lens (continued) - National level PPP policies and legislation
COUNTRY CONCESSION LAW PPP LAW/ACT PPP GUIDELINES
Mexico PPP Law PPP Guidelines
Netherlands Directive 2014/23/EU of the Public-Private Comparator European Parliament and of Manual 2013 the Council of 26 February 2014 on the Award of Concession Contracts
Philippines The BOT Law, as amended by PPPGB Guidelines and Republic Act No. 7718 Issuances Executive Order No. 136 Series 2013 Executive Order No. 8 Series 2010
Republic of Korea Act on Public-Private Partnership in Infrastructure Decree of the Act on Public- Private Partnership in Infrastructure
Rwanda Public Procurement Law Law No. 14/2016 of Public Private Partnership 02/05/2016 Governing Public Guidelines Private Partnerships National Investment Policy
South Africa Treasury Regulation 16 to the Public Private Partnership Public Finance Management Manual Act (PFMA) 1999
United Kingdom The Concessions Contracts Public Private Partnerships Regulations 2016 Guidance Infrastructure Act 2015
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B. While legal and policy frameworks ought to policy should ideally articulate ‘principles’ rather than provide stability, they need to be agile and designed rigid operating processes, which should preferably be to evolve to meet the ever-changing needs of defined separately through accompanying guidelines infrastructure development. and regulations. Second, given the evolutionary nature Care must be taken to ensure that infrastructure of the infrastructure sector, policies governing these policy and legislation takes into account country-level principles should be subject to a periodic review contextual factors and is aligned with the strategic (typically about every three to seven years), to provide needs and stages of evolution of the country, in terms a window for incorporating changes that may become of its infrastructure stock and gaps. It is particularly necessary. Guidelines and regulations issued under important to ensure that the policy framework policies or legislation should ideally have relatively provides for adequate agility and flexibility to adapt shorter review periods. to and incorporate changes. Global experience suggests that countries have found There are two ways in which agility can be built into it necessary to make at least some changes to the the design of the framework. First, the overarching policy and legislative frameworks for infrastructure from time to time.
CHANGES TO POLICY FRAMEWORK: The cases of the Republic of Korea and Indonesia The Republic of Korea amended its infrastructure Korea’s policy framework and project preparation PPP legislation multiple times within a decade processes is reflected in its infrastructure delivery of its enactment. Although Korea enacted its first outcomes. By 2015, an estimated 684 projects PPP Act (the Private Capital Inducement Act) in involving an outlay of US $80 billion have been 1994, the policy framework provided by this Act implemented since the framework became did not translate into large investments, owing to operational in 2005. limited risk evaluation, inadequate process rigour Indonesia’s new Presidential Regulation 2015 and limited budgets. Following the Asian Financial for Infrastructure seeks to improve on its earlier Crisis in 1997, a new PPP law, ‘The Act on Private regulation and encourages greater private Participation in Infrastructure’, was adopted to participation in infrastructure. Indonesia’s remove some of these constraints. This law progression in project preparation has been abolished the former categorisation of infrastructure founded with a learning-by-doing approach, based projects and improved procurement processes. The on its own challenges and lessons learned. While Private Infrastructure Investment Centre of Korea Indonesia’s PPP regulations date back to 2005, (PICKO) was created to provide project preparation they have recently been updated and replaced by support, including preparation of feasibility studies, new Presidential Regulations in 2015. New rules project reviews, bid evaluation, negotiations and governing the establishment and operation of concluding concession agreements, and the Project PPPs were put in place by Presidential Regulation Investment Management Centre (PIMA) was created No. 38 of 2015, which focuses on collaboration as an affiliate of the Korea Development Institute between the government and private sector for (KDI) for the preparation of pre-feasibility studies the procurement of essential infrastructure. The (PFS). A ten-year plan, with a pipeline of potential new regulation repeals the previous PPP regime PPP projects, was also formulated. These changes established by Presidential Regulation No. 67 of led to a significant improvement in the investment 2005. The updated regulation is a reaction to the climate and an increase in investment activity. By weak response to PPP projects conceived earlier, 2002, over ten new road projects were in operation. and to address other challenges, including gaps in Encouraged by these improvements, Korea again project preparation, delays in land acquisition, lack amended its PPP Act in 2005, which paved the of long-term project finance, and insufficient policy way for the merger of PICKO and PIMA to form the coordination among various government ministries Private Infrastructure Investment Management and agencies in the earlier years. The regulation Centre (PIMAC) under this Act. Since then, the PPI provides greater assurance relating to timely land Act 2005 and the PPI Act Enforcement Decree 2005 availability and greater government support for have provided the overarching legal framework for infrastructure PPPs. Although relatively recent, both public and private infrastructure investments. Regulation 38 of 2015 considers developments in The PPP Basic Plan and PPP Implementation infrastructure and PPPs globally, and is a response Guidelines provide the framework for project to Indonesia’s desire to increase the use of private preparation and implementation. The efficacy of capital for infrastructure.
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C. Follow-up guidelines, standards and processes Given that the UK was among the earliest to give are key to make policy actionable. a significant push to bring in private participation While an overarching policy or legislation for in infrastructure delivery, it is not surprising that infrastructure development is necessary, it is by several other countries have seen value in replicating no means sufficient. It ought to be accompanied some of the practices adopted here. For instance, by appropriate guidelines, standards and processes Australian state governments have adopted the United to translate policy intent into action and catalyse Kingdom’s Office of Government Commerce (OGC) infrastructure implementation. While several countries Gateway Review Process for quality assurance across have put such frameworks in place, the United all jurisdictions, adding modifications to enhance the Kingdom (UK) is considered to be a frontrunner, having outcome and make it more relevant to the Australian formulated a web of replicable guidelines, standards context. and processes across a whole host of areas relating to infrastructure project preparation.
NUTS AND BOLTS: The United Kingdom’s comprehensive guidance for project preparation The UK has a variety of tools and frameworks Model. These dimensions that are used at different stages of the project are: strategic, economic, commercial, preparation lifecycle, including the following: financial and management. For projects, a strategic outline case is prepared at the Project identification. To support project conceptualisation stage, thereafter an outline identification, the UK’s project preparation business case (OBC) is prepared at the pre- framework provides a multitude of tools: feasibility stage, which is followed by • Early Development Pool (EDP) for government a comprehensive full business case and its major projects and programs (GMPP): updates prior to implementation. Although Institutionalised by the Infrastructure and individual government departments and Projects Authority (IPA), the EDP includes projects local governments are not bound by project that could potentially join the GMPP in the future. preparation guidelines provided by HMT, most The inclusion of nationally significant projects in departments have designed internal project the EDP enables the IPA to provide close support processes in line with processes followed to line agencies at the project initiation stage for major projects. itself. Project approvals and quality assurance. • The Project Initiation Routemap (PIR): PIR HMT recommends the following guidelines for is a best practice guideline prescribed by the independent review: IPA, which provides a structured approach to • OGC Gateway ReviewTM: The Office of identifying and conceptualising projects through Government Commerce (OGC) Gateway ReviewTM a collaborative approach with line agencies. process was introduced in 2000 after several From 2018, all major projects are assessed for project failures in the UK and the re-evaluation of the need and suitability of applying the routemap the government’s effectiveness in projects and to guide conceptualisation. program delivery. • Stage 0 of the Five Case Model: The Five Case • Major Projects Review Group (MPRG): The Model is a thinking framework recommended by MPRG is an independent group of experts the Her Majesty’s Treasury (HMT), which defines from the government and private sector which a structured approach to developing business challenges projects on deliverability, affordability cases. Stage 0 of the Five Case Model outlines and value for money at key points in the a method to help identify projects that verify the approvals process. strategic necessity of the project or program. • IPA Quality Reviews: In addition, the IPA has Project feasibility and structuring. enhanced the quality review process with • Five Case Model: All line agencies must a range of different independent assurance prepare business cases for their spending reviews. Depending on the project cost and the proposals. These cases are prepared according department’s track record of executing projects to a model which views proposals from five of a similar complexity, these reviews range from interdependent dimensions, prescribed by the formal gateways to more bespoke ‘critical friend’ Green Book of HMT – known as the Five Case reviews.
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D. An aligned cascading of policies across the In such cases, even where the national government national and sub-national levels is important. may not have direct jurisdiction over sub-national In most countries, the responsibility for infrastructure governments, it would be efficient to have nationally development is distributed across not just different aligned policies that sub-national governments may line departments and GCAs, but also among several apply while framing local regulations. sub-national governments. Sub-national governments, in many cases, also have independent jurisdiction to legislate for infrastructure provision. It is therefore critical for countries to ensure that policies governing infrastructure project preparation are aligned across different GCAs and among sub-national governments as well, and not just at the level of national governments.
ALIGNMENT AT THE SUB-NATIONAL LEVEL: Australia and India
State infrastructure units, Australia: In Australia, Sub-national infrastructure development and infrastructure project preparation follows the PPP legislation and policies, India: India’s country’s federal system, with each state having project preparation framework is steered by its its own institutional framework to support project line ministries and sub-national governments, development. Typically, this comprises: (i) the state who have adopted a streamlined, systematic treasury department, to provide quality assurance, approach to project development. The states in approve projects and prepare annual budgets for India are critical for infrastructure development. government expenditure; (ii) a state level PPP unit While at the national level, there is a focus on that establishes good practice guidelines for project developing key infrastructure sectors like national preparation; and (iii) a state level planning agency, highways, telecommunications, power, railways which sets the long-term vision and strategic and airports, the responsibility for the development priorities for the development of the state. Some of other sectors, like water and sanitation, states have also established specialised institutions health, and education, is shared with the state to support project development. For instance, PPP governments. Project preparation activities in projects in the state of Victoria are supported by India are decentralised and are largely driven by the Office of Projects Victoria. The office provides contracting authorities. Line ministries, state and guidance on technical scope, engineering design, local governments at the sub-national level are project cost, and financial and contractual risks responsible for their own project preparation. during project evaluation. In the state of New South To streamline project preparation at the state level, Wales, the state treasury department has set up the most states have enacted state-specific legislation Infrastructure and Structured Finance Unit, which for PPPs, and instituted central agencies for specialises in providing commercial and financial project planning and development. These central advice to the state government on infrastructure agencies also provide financing support for project projects with a cost of over US $70 million (AU preparation. A number of states including Gujarat, $100 million). Punjab, Bihar, and Andhra Pradesh have already developed specific legal frameworks to enable private partnerships in infrastructure. Other states, including Karnataka, Odisha Maharashtra, and Assam, have specific policy frameworks. States like Tamil Nadu and Gujarat have followed up their state level infrastructure legislation with the creation of Infrastructure Development Boards and formulated detailed attendant regulations and guidelines to implement policy.
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E. Sector-specific legislation or policies may also be necessary to drive infrastructure project preparation COMPLEMENTARY SECTORAL POLICIES: in addition to cross-cutting policies. Energy policy changes behind South Africa’s Similarly, cross-cutting initiatives on the overall policy renewable success and legal framework for facilitating infrastructure South Africa’s very successful Renewable investment may need to be complemented with Energy IPP Procurement (REIPPP) Programme changes to sector-level policies and legislation. Given is the product of a firm vision for the country that most infrastructure sectors have typically been and its power sector, reflected in a multi- the domain of governments and managed by GCAs, year planning framework, backed by a strong initiatives to restructure these sectors and introduce political will to achieve the vision’s objectives. private sector participation will frequently require The consistent and coordinated policy actions amendments to existing government policy. to initiate regulatory and institutional reforms Therefore, as countries seek to scale-up their and operationalise the recommendations of infrastructure investments, they will often need to the Integrated Energy Plan, the Integrated review sector-specific policies and legislation and Resource Plan, and the White Paper on Energy make necessary changes to these. For instance, and Renewables remain the foundation of the India has seen several transformative policy shifts project’s success. The successful program was since the mid-1990s, as it sought to open up various preceded by critical sectoral reforms including infrastructure sectors. For example, the country’s the following: telecom sector was opened up under its National • A multi-year capital investment planning Telecom Policy 1994, which has since been updated framework that is consistent with multiple times and has paved the way for a near development priorities. The sectoral planning complete transition from a sector entirely managed by documents (the Integrated Energy Plan 2003 the public sector to one where the public sector also and the Integrated Resource Plan 2010) plays a role. Similarly, the Electricity Act 2003 provided were aligned with the nation’s commitment an enabling framework to delicense generation to reducing its carbon footprint. The initial and paved the way for private investment in power impetus to the program was provided in the generation. White Paper on Energy Policy in 1998 (which promoted a greater role for the private sector and diversification of energy sources), and the White Paper on Renewables in 2003 (which envisaged 10,000 MW of energy from renewables).
• The Electricity Regulation Act [No.4 of 2006] provided for the establishment of an energy regulator (Section 3); the licensing of activities (Section 7); the ability of the regulator to estimate new generation capacity requirements, establish tendering procedures, and promote private sector participation (Section 34); and regulations on new generation capacity (Section 35). Specifically, Sections 34 and 35 of the Act set the framework for the REIPPP Programme.
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F. Adapting and replicating contextually relevant some of the barriers to infrastructure investment and policies from global experience can accelerate help create building blocks for a conducive investment capacity creation for infrastructure development. environment for infrastructure development. This is As countries seek to formulate policies and conducive particularly important for EMDEs, which are often enabling environments for scaling up infrastructure disadvantaged by weak institutional capacity and investment, they would do well to adapt and replicate baseline infrastructure stock to start with. A concerted effective policies that have worked elsewhere. effort to benchmark and incorporate best practices Replicating contextually relevant and appropriate in policy formulation from across the globe can be policy frameworks and lessons from experience can particularly useful. help governments expedite the elimination of at least
REPLICATION OF BEST PRACTICES: Experiences of Australia and the Netherlands in adapting the UK’s Gateway Review Process
AUSTRALIA - Adoption of the UK’s Gateway THE NETHERLANDS - Dutch Gateway Review Review Process: Australian state governments Method: Based on the UK’s Gateway Program have adopted the United Kingdom’s Office of and housed in the Gateway Bureau in the Ministry Government Commerce (OGC) Gateway Review of Interior and Kingdom Relations, the Dutch Process for quality assurance, adding modifications Government has reviewed over 50 high-risk projects to enhance the outcomes and make it contextually since 2007, with very positive results. Independent relevant. The Department of Finance within the confidential assessments under this initiative have Government of Australia recommends a staged contributed to improved project management and escalation within the review process called delivery of high-risk projects. Typical project level ‘Enhanced Notification’, which defines escalation gateway reviews include: actions based on triggers in project assurance. • Gateway 1 - Purpose and justification is The Government of Victoria has added additional performed at the start of a project to confirm project assurances for high-value or high-risk its rationale. projects. Typically, all projects undergo a gateway review process at the state level, based on the UK’s • Gateway 2 - Preparation and procurement are Gateway Review Process, that consists of a series executed once the project approach is firm and of structured reviews to examine procurement when the project’s rationale and the intended at key decision points in the project cycle. These results are demonstrable and desirable. reviews are used to improve on-time and on-budget • Gateway 3 - Realisation is executed as soon as project delivery and are conducted by dedicated suppliers are formally approached and seeks to teams housed within the treasury departments of verify if the intended approach will be successful state governments. in this realisation phase.
• Gateway 4 - Readiness for implementation is performed before the project team transfers the result to the line organisation(s) or just before the implementation phase.
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2.3. PUBLIC INSTITUTIONAL CAPACITY
2.3.1. Summary The capacity of public institutions to plan, prepare and 2. CENTRAL AGENCY or PPP UNIT - Project deliver infrastructure projects is central to effective preparation infrastructure development. Even where infrastructure e.g. Indonesia - PPP Unit, Kenya – PPP Unit, Republic projects are executed with private sector participation of Korea – PIMAC through PPP arrangements, the role of the public sector institutions is crucial. In most countries, GCAs are called upon to play the role of project preparation and procurement Within the applicable constitutional boundaries, (starting with project concept definition, feasibility, this will also call for different institutional models for and procurement), especially where projects are various facets of project preparation, either in implemented by public authorities themselves. a centralised manner (namely the creation of a central However, wherever projects are implemented using agency mandated to catalyse project preparation), or the PPP model, governments have typically created in a decentralised manner, where the capacity creation central agencies or PPP units that handle project efforts aimed at improving project preparation are preparation responsibilities. directed by the government contracting agencies (GCAs). The central agencies or PPP units typically created under the national PPP legislation or policy are Broadly, public sector institutions are required to responsible for issuing and developing guidelines play different roles. The country-lens review done and processes to implement the policy or legislation, as part of the preparation of this reference tool and in many cases, are also vested with an overall provides evidence of three types of roles (as explained responsibility for project preparation and project below) that public institutions play in the context of preparation financing, typically as a custodian of infrastructure project preparation. Also refer to a dedicated Project Development Fund (PDF). Exhibit 2.2. In some cases, development institutions set up to provide infrastructure financing also play the role 1. CENTRAL AGENCY - Infrastructure plans and of supporting GCAs in project preparation, primarily projects pipeline to set standards and guidelines for project preparation e.g. The Philippines – National Economic Development and reviews. In some cases, like PT SMI in Indonesia Agency (NEDA), the UK – Infrastructure and Projects and FONADIN in Mexico, infrastructure financing Authority (IPA), Indonesia – National Development institutions also play a role in supporting GCAs with Planning Agency (BAPPENAS) project preparation. Governments are called upon to undertake medium- 3. GOVERNMENT CONTRACTING AGENCIES (GCAs) to long-term infrastructure plans, and the aggregation of these plans and presentation of a consolidated In most countries, a large part of the project national infrastructure plan is often a critical preparation mandate resides with GCAs. In the early requirement in the project preparation value chain. stages of a country’s infrastructure scale-up, the Apart from preparing the country-level infrastructure capacity of GCAs to prepare and implement complex plan, there is also a need to translate this multi-year infrastructure projects is often weak, especially when infrastructure plan into a pipeline of projects, which it comes to structuring and managing PPP projects. are then prioritised for development. Typically, the task A scale-up of infrastructure will require a of preparing such multi-year plans is done by commensurate scale-up of the capacity of GCAs, an infrastructure authority in the national government. notwithstanding the presence of apex institutions that Some of these agencies are also entrusted with the may have been set up to bridge this gap with close role of translating the multi-year infrastructure plan support early on. It is important that the capacity of into a pipeline of projects. In some countries, the task public institutions is commensurately strengthened, of preparing multi-year plans is handled by respective not just at the national level but also at the level of line departments or GCAs responsible for sector-level sub-national governments. planning and implementation.
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Exhibit 2.2 Institutions at the national level involved in infrastructure project preparation
PROJECT PREPARATION ACTIVITIES
Long-term Setting Project Quality Project strategic policies and identification, assurance and preparation Other support institutions Country planning guidelines screening and approvals financing prioritisation
Infrastructure Department Line ministries Department Line ministries National PPP Working Group Australia of Finance, and sub- of Finance, and sub- – Jurisdictional cooperation Government of national Commonwealth national and process improvements Australia government Government government for PPPs departments, departments AUSTRALIA Infrastructure Australia
Ministry of Ministry of Line ministries Ministry of Line ministries Secretariat of Investment Planning, Planning, and sub- Planning, and sub- Partnership Program (SPPI) Budget and Budget and national Budget and national involved in long-term strategic Management Management government Management government planning, setting policies and departments departments guidelines, project screening, quality assurance and project preparation financing for national priority projects BRAZIL (The Ministry of Planning, Budget and Management will be integrated with the Ministry of Finance after 1 January 2019. The new ministry will be called the Ministry of Economy).
Infrastructure Treasury Board Line ministries Treasury Board Line ministries Canada Infrastructure Canada Secretariat, and sub- Secretariat, and sub- Bank – Procuring authority, Government of national Government of national investment and centre of Canada government Canada government expertise for PPPs departments departments Canada Environmental
CANADA Assessment Agency – Environmental impact assessment appraisals and policy development
Ministry of National National National Line ministries The National Regional Public Works Investment Investment Investment and sub- Development Fund (FNDR) (Sectoral long- System System System national may be accessed for Socially term plans) (administered (administered (administered government Recommended (RS) projects by the Ministry by the Ministry by the Ministry departments
CHILE of Social of Social of Social Development Development Development and Ministry of and Ministry of and Ministry of Finance) Finance) Finance)
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 27 CHAPTER 2 CHAPTER 28
| Country NETHERLANDS MEXICO INDONESIA INDIA KENYA CHINA GLOBAL INFRASTRUCTURE HUB (MIWM) Management and Water Infrastructure of Ministry (SHCP) Public Credit Finance and Secretariat of BAPPENAS India Transforming Institute for National Treasury National Commission and Reform Development National planning strategic Long-term MIWM SHCP Finance of Ministry BAPPENAS, Finance of Ministry PPP projects PPP Unitfor Treasury, National Center China PPP Finance of Ministry guidelines policies and Setting PROJECT PREPARATION ACTIVITIES departments government and sub-national Line ministries departments government sub-national ministries and line BAPPENAS, departments government and sub-national Line ministries prioritisation in screening and PPP unitassists Line ministries, departments government and sub-national Line ministries departments government sub-national Rijkswaterstaat, prioritisation screening and identification, Project Finance of Ministry for PPPprojects PPP committee public projects, Treasury for National Commission and Reform Development National approvals assurance and Quality MIWM SHCP Finance of Ministry and sub- Line ministries funds development project supported MDB- departments government national and sub- Line ministries departments government national and sub- Line ministries financing preparation Project departments government ministries and Line departments government sub-national ministries and individual line (FONADIN), Infraestructura Nacional de Fondo Finance of Ministry PT SMI, departments government national – To fast-trackpriority Project Monitoring Group support andfinancing support –Landacquisition LMAN Coordination forPPPs PPP JointOffice– inactions for government actions/ IIGF –Provides guarantees forpriorityprojects efforts KPPIP –Debottlenecking projects Other support institutions Other support UNITED KINGDOM SOUTH AFRICA RWANDA REPUBLIC OF KOREA PHILIPPINES Country Commission Infrastructure National Treasury (NT) National (MINECOFIN) Planning Economic Finance and of Ministry (MOEF) and Finance Economy of Ministry (NEDA) Authority Development Economic and National planning strategic Long-term Authority (IPA) and Projects Infrastructure NT MINECOFIN Center (PIMAC) Management Investment Infrastructure Private Public and PPP Center guidelines policies and Setting Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation PROJECT PREPARATION ACTIVITIES departments government ministries and Line departments government national and sub- Line ministries Line ministries PIMAC NEDA departments, government national and sub- Line ministries prioritisation screening and identification, Project Committee - Investment Public Approval MOEF – assurance – Quality PIMAC NEDA approvals assurance and Quality HM Treasury Approval by NT assurance; quality performs Treasury) within National Centre (GTAC, Advisory Technical Government MINECOFIN ENABLING ENVIRONMENTENABLING FOR PROJECT PREPARATION MINECOFIN departments government sub-national ministries and Individual line departments government national and sub- Line ministries financing preparation Project departments government ministries and Line funds development project supported MDB- departments, government national and sub- Line ministries MINECOFIN institutions Other support needs. UK’s long-terminfrastructure and adviceto address the strategic thinking,analysis provides independent, Commission (NIC), which National Infrastructure projects preparatory financingofPPP (by GTAC) facilityforproject Project Development Account priority projects) Infrastructure Plan(national (PICC) prepares theNational Coordinating Commission Presidential Infrastructure
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29 CHAPTER 2
2.3.2. Guidance
A. Empowered central agencies can help Key elements of the guidance framework under institutionalise project preparation capacity and public institutional capacity are summarised standards. below: In the last few decades, as governments have A. Empowered central agencies can increasingly looked to the private sector not just for institutionalise project preparation capacity infrastructure construction but also its management and standards. and service delivery through PPP arrangements, GCAs have been found wanting on many of the skills B. Sector-specific agencies may be needed necessary to handle such arrangements. Further, when investment and/or transformation in EMDEs with severe infrastructure gaps, GCAs needs are significantly large. typically do not have the institutional and financial C. When central agencies are vested with capacities necessary to implement some of the larger multiple roles, capacity and conflicts need infrastructure projects which are deemed necessary to be handled carefully. for development.
D. Distinct governance structures may be Therefore, as governments embark on large-scale necessary to prepare and implement large infrastructure projects to correct this historical lag, complex projects. the responsibility and capacity to drive this effort is often vested in a central agency as a means to provide E. Building complementary capacity in GCAs is focus for project preparation and implementation, as crucial for project preparation effectiveness. well as to build necessary capacity and institutional empowerment. The central agency, in some cases, is empowered by the specific PPP legislation.
Such an institutional intervention helps expedite the creation of standards, build institutional capacity to support GCAs in project preparation, and ensure a threshold level of quality project preparation. Such agencies are also often vested with driving the PPP agenda and attracting private sector investment through a focused development of capacity, both within themselves and within the GCAs they work with.
Central agencies, therefore, are often called upon to play a variety of roles, in putting into place institutional enablers for PPPs, including setting up and managing Project Development Funds (PDFs); enacting processes for engaging consultants and transaction advisors; supporting GCAs in project preparation and transaction advisory activities; managing the overall PPP program under the direction of the government; and capacity building of other public institutions. When equipped with commensurate capacity and empowerment through the delegation of powers, central agencies and PPP units can play a vital role in expediting infrastructure creation.
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CENTRAL AGENCY MODELS: The Infrastructure and Projects Authority (IPA) in the United Kingdom and the Public and Private Infrastructure Investment Management Center (PIMAC) in Korea
The Infrastructure and Projects Authority (IPA), UK • Training and leadership development: The IPA Established in 2015, through the merger of has partnered with Oxford Saïd Business School Infrastructure UK (IUK) and the Major Projects to create the Major Projects Leadership Academy Authority (MPA), the IPA has a long history of (MPLA). MPLA aims to improve the ability of managing and delivering major infrastructure senior civil servants to lead major projects and projects through its founding institutions. The is regarded as the gold standard for project merged IPA combines expertise in delivery, leadership training. Over 400 professionals have assurance and financing, helping to manage major enrolled in the MPLA, and 250 have graduated infrastructure projects within one government entity, to date. In addition, the IPA has launched other defined as the “UK government’s centre of expertise project leadership training, apprenticeship and for infrastructure and major projects.” The IPA future leaders’ programs. establishes the overarching framework for project • Project leadership development: In 2017, the preparation in the United Kingdom and formulates IPA launched the Project Delivery Capability guidance that serves as standards for UK GCAs Framework (PDCF), which outlines a common to prepare and implement projects. The IPA also language for the profession and defined undertakes quality assurance reviews for major career paths to help manage their careers. projects, and supports capacity development and This framework is now being used by all major delivery support. It reports to Her Majesty’s Treasury departments to help drive professionalism. (HMT) and the Cabinet Office, and oversees general In addition, the Government Online Skills policy on project delivery and quality assurance of Tool (GOST) supports the roll-out of PDCF by specific business case proposals. allowing individuals to assess their skills and competencies against any project role, and to The IPA does not implement projects but focuses on identify development options. It is being used by the overall project delivery system, which includes the over 4,000 project professionals and this number projects, people and processes that together create will grow following full roll-out. the right environment for successful delivery. It is part of a wider institutional framework for infrastructure • Independent quality assurance: The IPA uses planning and delivery. HMT and IPA provide a variety independent experts for peer review and quality of support tools to guide project preparation in the assurance of projects at critical stages, against a UK. While these are binding only on major projects clear set of project standards. During 2017-2018, that require HMT approval or projects that also solicit the IPA conducted 230 independent assurance an independent review from IPA, most line agencies reviews on the Government Major Projects have aligned their project preparation activities with Portfolio (GMPP) projects. The IPA has created an the best practice guidelines prescribed by HMT and assurance review pool of over 1,600 independent IPA. The contributions of IPA and its predecessor assurance reviewers from across government and entities include the following: industry.
• Setting project standards and good practice • Performance review: The IPA undertakes the guidance. This includes documentation related Infrastructure Performance Review to identify to all major aspects of project preparation and ways the government, working with industry, can project evaluation, such as project initiation improve the quality, cost and performance of routemaps, independent assurance methodology UK infrastructure, building on the Infrastructure and other technical guidance documents and Cost Review 2010–2014. The IPA supports templates. the preparation of the National Infrastructure Development Plan, which brings together all of the • Infrastructure delivery support: The IPA has government’s infrastructure delivery priorities over a team of commercial specialists that provide the next five years, and the National Infrastructure direction to the government and GCAs on all Construction Pipeline, which is a forward-looking aspects of infrastructure delivery. The specialists pipeline of planned projects and programs in can be deployed alongside project teams to economic and social infrastructure and housing. strengthen client capability. The IPA also provides HMT and the Cabinet Office with commercial advice on business case approvals for specific projects. continued...
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 31 CHAPTER 2
Public and Private Infrastructure Investment • Stakeholder engagement in project Management Center (PIMAC), the Republic development: PIMAC’s PFS studies are guided of Korea by a transparent stakeholder engagement The role of the Public and Private Infrastructure process and follow a ‘five meeting rule’. The Investment Management Center (PIMAC) in the five meeting rule includes i) Progress check project preparation process presents a case of meeting; ii) KDI 1st Check meeting; iii) MOEF continuous learning and adaptation. Created 1st Check meeting; iv) KDI 2nd Check meeting; to enable the comprehensive and systematic and v) MOEF 2nd Check meeting. The review management of both traditional public investment covers MOEF, line ministries, PIMAC and field projects and PPPs, PIMAC is organised along three specialists from private and public sectors. divisions, namely (i) the public investment division; • Mapping guidelines for preparatory activities: (ii) the public-private partnerships division; and (iii) PIMAC has formulated guidelines for all major the policy and research division. project appraisal and approval processes, • The public investment division conducts including the Basic PPP Plan, VfM test and manages Pre-Feasibility Studies (PFS), guidelines, RfP preparation, tender evaluation, supports policy research on public investment Build-Transfer-Lease (BTL) project management, management and undertakes program etc. In a bid to standardise output quality, evaluation and performance management of PIMAC has also prepared standard output public investment projects. specifications by facility (schools, military housing, and integrated school facilities) and • The PPP investment division formulates PPP standard guidelines for PFS in general, road Annual Plans and develops PPP guidelines, and railway sectors. conducts evaluation of PPP projects, undertakes research on PPPs, supports financing and • Risk distribution frameworks and cost refinancing of PPPs, and undertakes capacity management: PIMAC has evolved revised risk- building and training. sharing mechanisms, including, for instance, incorporating lessons from the former Minimum • The policy and research division supports Revenue Guarantee scheme, to enhance private research on project evaluation methodology interest while rationalising government support. and project appraisal, and manages the PIMAC also undertakes resource (cost and time) Reassessment Study of Feasibility (RSF). reviews for large projects at each stage of the It has spearheaded multiple policy and process project lifecycle under its Total Project Cost interventions to improve the quality of project Management (TPCM) framework. preparation including the following: • Capacity building program: PIMAC offers • Independent review process for project periodic capacity building programs for elected approval: The PIMAC provides an independent officials and technical staff. This includes review for project preparation by conducting domestic programs sponsored by PIMAC and various studies and evaluations including the MOEF or international programs by multilaterals PFS, RSF, Reassessment of Demand Forecasts or donor agencies. The objective is to inculcate (RDF) and Value for Money (VfM) analysis (for learnings from PPP processes globally. PPP projects). While the PFS provides an initial filter for project selection, the RSF and RDF reformulate and independently check outcomes of feasibility studies and demand forecasts. PIMAC assembles a multi-disciplinary expert team along with its in-house staff for these evaluations. The review leverages PIMAC’s multi-sectoral internal know-how and brings in expertise from external stakeholders, including from KDI (project management), university professors (transportation demand analysis), and private engineering firms (cost estimation).
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B. Sector-specific agencies may be needed when Sector-specific entities are particularly crucial when investment and/or transformation needs are investment commitments are large, and where such significantly large. investments are being managed as a multi-year long- While central specialised agencies can help create term program. While such entities are typically vested wider harmonisation of project preparation practices with a project implementation role, strengthening their and guidelines, in many cases, sector-specific entities capacity to build rigour in project preparation becomes may need to be created or empowered, especially particularly crucial for consistently bringing high- when large ambitious sector-wide programs need quality projects to market. to be rolled out.
SECTOR-SPECIFIC AGENCIES – EPL BRAZIL AND NHAI INDIA
EPL Brazil’s role in project preparation for multi- • Driving innovation and quality assurance – modal transportation EPL has also brought in methodological and While Brazil’s national planning process resulted technological innovations to project studies, in alignment in project selection, project preparation including the use of an updated transport matrix was constrained by unclear criteria for project for viability assessment. EPL is developing an appraisal and independent reviews. To address independent business case model for transport this gap, the Brazilian Planning and Logistics projects with technical assistance from the Company (EPL), a public company, was set up in Government of the UK and the IPA. It has 2012, to support project planning and preparation long-term arrangements with the International for multimodal transportation. EPL works in Finance Corporation (IFC) for technical and coordination with the Ministry of Transportation financial support. and the Ministry of Planning and its key areas • Transparency in project preparation – EPL of support include: mandates that detailed project information and • Preparation of the National Logistics Plan and project documents prepared by the entity shall multi-modal plans – EPL prepared a multi-year be uploaded in the project portal. Further, every National Integrated Logistics Plan 2035 (PNL) project is required to go through a public hearing identifying a portfolio of projects and a priority process and make disclosures with respect to list of actions to debottleneck the sector. The the changes in the project studies post public PNL is prepared based on global best practices hearing. The cost of project studies for EPL may and simulates scenarios based on a dynamic be reimbursed by the winning bidder in the case four-step model, a tool that estimates inter-zonal of PPP projects. traffic flows considering trip generation and distribution, modal choice and flow allocation.
• Preparation of support studies for
transportation projects – EPL provides support
to line departments in undertaking technical
and financial studies for projects. EPL may hire
external transaction advisors for the studies and ensures monitoring and quality review of these studies. continued...
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 33 CHAPTER 2
C. When central agencies are vested with multiple NHAI India – Scaling up India’s national roles, capacity and conflicts need to be handled highways in a bankable and programmatic carefully. manner Central agencies often handle multiple roles, and this The National Highways Authority of India (NHAI) can create potential capacity and conflict of interest was established in 1988 to develop, maintain challenges. and manage national highways in India. It The sheer size of the infrastructure challenge alone came to prominence after it was mandated to in most countries can overwhelm infrastructure develop 50,000 km under the National Highways agencies. Many of the agencies are vested with Development Project (NHDP) and more recently a multi-sectoral role and to deliver on their mandate, an additional 75,000 km under the Bharatmala they have to deal with multiple GCAs, government program. The NHAI has been instrumental in departments and other stakeholders, often across mobilising private funding for the development different sectors and geographies. Second, in terms of highways and has pioneered a transition in of their functional roles, these agencies are required infrastructure financing from traditional public to handle a variety of functions, including the procurement to PPPs within a very short period. formulation of guidelines and standards, procurement In the mid-nineties, PPPs in the highways sector of consultants, planning for project preparation, received a lukewarm response from the private oversight of feasibility evaluations and, in many sector, owing to poor project preparation and cases, supporting GCAs through time-consuming PPP a lack of standardised contractual frameworks. transactions. Therefore, there is a real possibility that NHAI was among the first to introduce model the agency’s role can become diffused. With a diverse concession agreements (MCAs) for national mandate, it can very quickly become overwhelmed, highways, under the Build-Operate-Transfer (BOT) in terms of the sheer expectations and workload model. Subsequently, NHAI has standardised relative to its capacity. MCAs for different modes of project execution, Similarly, the possibility of conflicts of interest arising thus improving efficiency and transparency within such agencies is very real, given that they may of risk-sharing. often be called upon to play a role in identifying and Concurrently, NHAI has also developed and preparing projects, while also being asked maintained a standardised set of procedures to provide inputs into the project reviews and to be followed while undertaking project approval process. Effectively, there could be preparation activities. a situation where the agency is asked to develop a project while also evaluating its feasibility. Conflicts NHAI also routinely hires external consultants may also arise when they have some form of public- or experts to prepare project preparation private arrangement and where success fees are paid documents. To enable quality assurance, NHAI for closing transactions. Handling such situations undertakes independent reviews of project becomes particularly challenging in the early stages, feasibility studies, through a specialised team when capacity constraints may limit their ability within NHAI or through the empanelment of peer to create safeguards in the form of separation consultants. As the apex agency for national across functions8. highways projects in India, NHAI also routinely undertakes market consultation exercises, to To address these challenges, governments need to glean feedback from developers, investors and ensure that appropriate measures are put in place bankers on the challenges faced by national in respect of the creation and management of these highway projects and redressal mechanisms central agencies. to be explored. As of 2018, NHAI has awarded 1. Clear mandate and business plan: Central more than 610 projects, of which approximately agencies should prepare annual and multi- 300 projects were undertaken as PPPs. year business plans to clarify the scope of their operations and activities under different categories of activities, for instance, under project preparation, and support to GCAs in transaction advisory.
8 http://web.worldbank.org/archive/website01021/WEB/ IMAGES/311DUTZ_.PDF
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2. Clear ring-fenced revenue streams: The agency D. Distinct governance structures may be necessary should be provided with clear and ring-fenced to prepare and implement large complex projects. revenue streams commensurate with the scope The more complex a project, the more necessary it of their mandate and operations. becomes to create an enabling structure operating 3. Transparent governance: The agency should outside of the government’s bureaucratic framework. ideally have a corporatised structure and be This helps with the compartmentalisation of efforts governed by an independent board. and financing, culminating in effective project delivery. In some cases, special agencies are set up 4. Organisation and staffing: Organisational for implementing such large complex projects, under structure and staffing should be commensurate, which project preparation capacity is also undertaken. in terms of number and quality of staff, complemented with external experts as appropriate. DISTINCT ‘PROJECT LEVEL’ STRUCTURES
5. Conflict management: A well-formulated policy South Africa – REIPPP Programme should be implemented to identify and address The Department of Energy (DoE) and the potential areas of conflict, including through clear National Treasury’s PPP Unit established the functional separation and, wherever possible, DoE IPP Unit to implement South Africa’s avoidance of conflict by assigning the conflicting ambitious Renewable Energy IPP Procurement function to a different agency. Also, any policy- (REIPPP) Programme. This unit functioned making roles that conflict with the nature of work outside of the departmental structure and was done by the central agency should be ideally staffed with cross-functional experts from both housed outside the agency, for instance, in the departments. Ministry of Finance. United Kingdom – Crossrail Ltd. In the UK, major projects are often implemented MANAGING CONFLICTS AND CAPACITY through special agencies with their own budgets. CHALLENGES For example, Transport for London (TfL), the The Netherlands – separation of policy and local government transport body for Greater project preparation roles London, set up Crossrail Ltd. to implement new In the Netherlands, the policy and railway lines in London. Once completed, these implementation functions are housed under lines will be transferred to TfL for operations. separate distinct entities. While the Ministry of Infrastructure and Water Management India – Delhi Metro Rail Corporation Ltd. (MIWM) oversees the drafting of policies (DMRC) for infrastructure development, project The Delhi Metro Rail Corporation Limited preparation and procurement is undertaken by (DMRC) was set up as a joint venture between Rijkswaterstaat, the implementing agency of the Government of India and the Government MIWM. Rijkswaterstaat is responsible for the of the National Capital Territory of Delhi (GNCTD) construction and maintenance of the main roads in 1995 to construct a metro rail network for network, the waterway network and major water Delhi and the National Capital Region. This systems. special agency was responsible for preparing and implementing projects to provide the city of Delhi and adjoining areas with metro rail connectivity. Phase I of the Delhi Metro covered 65 km and was constructed at a cost of US $2.1 billion. The network of Delhi metro has since been expanded to over 350 km.
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 35 CHAPTER 2
E. Building complementary capacity in GCAs is crucial for project preparation effectiveness. Traditionally, the responsibility for infrastructure project preparation and implementation has been vested with the respective line departments and GCAs. However, even GCAs with relatively strong organisational and technical capacity have often relied on traditional public procurement processes and are often short on capacity and know-how to undertake PPP transactions.
As a result, a number of countries have created PPP units to address these gaps and to create a centre of excellence wherein such capacities are nurtured and housed. However, unless such capacities are widely created, a large-scale expansion of infrastructure could be severely constrained.
This is also evident in how countries like the United Kingdom and Korea, which were relatively early movers in creating central agencies (Infrastructure UK and its successor IPA in the United Kingdom, and PIMAC in Korea), continued paying considerable attention to strengthening capacity across a range of GCAs in different sectors. In both these countries, the agencies were not only responsible for individual project feasibility reviews, but for creating standards, guidelines and tools that were eventually adopted by other GCAs, including at the level of sub-national governments, leading to a harmonised replication of leading practices.
To sum up, a robust policy framework that provides stability, certainty and consistency of government commitment to infrastructure creation, coupled with an empowered and well-governed institutional framework that is able to effectively translate policy goals into bankable and implementation-worthy projects, forms the backbone of infrastructure project preparation. Nurturing an enabling environment for infrastructure project preparation starts here. The following chapter looks at another crucial enabler, the sustained and diversified availability of financing for project preparation.
36 | GLOBAL INFRASTRUCTURE HUB FINANCING PROJECT PREPARATION
3. Financing project preparation
3.1. OVERVIEW
The preparation of infrastructure projects often Exhibit 3.1 Indicative estimates of project preparation requires intensive work across multiple stages to get costs (as a % of total project cost) from an identified project need or concept through to feasibility evaluation, project structuring, reviews, Source Range of costs and approvals, before it becomes procurement-ready. Global Infrastructure Basel: 3-5% in developed There is a growing realisation that what is needed Unleashing private capital markets, could go is a full lifecycle approach that examines aspects investments for sustainable up to 10% in frontier of the project throughout the construction and infrastructure greenfield markets operations stages, as opposed to an overriding projects, 2014 focus solely on asset creation, along with a sharper crystallisation of outcome specifications to be United Nations: Catalysing 5% delivered. early stage investment, 2011 Further, many projects require an assessment to determine whether to deliver the project using Global Green Growth 5-10% the PPP model, which calls for the evaluation of Institute: Infrastructure additional elements during preparation. These include finance in the developing an analysis of project risks, structuring options world, 2015 for optimal risk allocation and transfer, Value for Money analysis, and level of government support World Bank 3-5% in developed required, along with implications on fiscal costs and economies; 10-12% contingent liabilities, wider stakeholder engagement in emerging and market sounding, and greater rigour in contract economies documentation. InfraCo Africa 10% in small-scale As a result, project preparation becomes significantly energy projects more multi-disciplinary, requiring an array of deep and diverse skills and expertise across technical, These cost figures are only indicative, as project economic, social, environmental, and financial preparation costs vary widely, based on factors aspects. Yet, GCAs mandated to implement such as: infrastructure projects are often not fully equipped with these skillsets and have to source assistance • the project size and complexity; from consulting firms, subject-matter experts, legal • the project’s development as a standalone project firms, academic institutions, and research institutions or as part of a wider program; to prepare projects effectively. This increased complexity and need for access to specialised • if the project is in a single geographic location external expertise leads to an increase in the costs or across several regions; of infrastructure project preparation. • the extent of technical detailing needed; Infrastructure project preparation costs in developing • the severity of social and environmental impacts; countries typically range from 5-10% of the total project investment, and about 3-5% of project costs • the duration of the preparation process; and in developed countries. Also refer to Exhibit 3.1. • the extent of upstream preparation.
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 37 CHAPTER 3
In many instances, capacity-constrained GCAs, 3. GCA BUDGETS especially in EMDEs, are either unfamiliar with the Notwithstanding these dedicated funding nature of project preparation requirements or lack avenues through PDFs and PPFs, project adequate financing for project preparation. This preparation financing for infrastructure is typically results in projects being taken to procurement dominated by government budgetary allocations without the requisite readiness, which leads to cost to GCAs. Therefore, even as governments seek and time overruns during implementation. to create dedicated PDFs and to tap external PPFs, they will still do well to use higher levels of Establishing adequate ring-fenced resources for financing from budgetary allocations, while also financing project preparation is, therefore, yet another making their deployments more efficiently. critical enabling requirement to effectively implement infrastructure projects. The country-lens analysis suggests that governments have typically addressed This chapter addresses the salient aspects of financing for project preparation through three these streams of financing available for project streams, as described below: preparation: 1. Dedicated PROJECT DEVELOPMENT FUNDS • Project Development Funds (Section 3.1) (PDFs) Many countries have set up project development • Project Preparation Facilities (Section 3.2) funds or facilities (PDFs) as dedicated financing • Government budgets (Section 3.3) vehicles supported by the requisite oversight and staffing for conducting feasibility studies and transaction advisory support for infrastructure projects. Typically, these PDFs are supported with a revolving fund and focus mostly on developing PPP projects, where the costs of project preparation are typically higher. The PDFs also help to set processes and standards in procuring advisors, in developing terms of reference for studies, and in ensuring rigour in feasibility evaluations through multi-stage reviews.
2. External PROJECT PREPARATION FACILITIES (PPFs) As a response to infrastructure project preparation needs, external project preparation facilities (PPFs) have been created by MDBs as another source of financing for governments to prepare bankable infrastructure projects. While some facilities have reached operational maturity and are seeking resource replenishment and expansion, others are in the early stages of development. Such external facilities are also being created by bilateral Development Finance Institutions (DFIs) and global non-government organisations and foundations.
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3.2. PROJECT DEVELOPMENT FUNDS Public institutional capacity). These agencies are typically mandated to create processes, guidelines, 3.2.1. Background and standards to undertake project development Many governments have set up central Project activity and to build capacity. Development Funds (PDFs) as a means to provide PDFs can be set up in an array of different forms dedicated financing for project preparation and also at the national and sub-national government levels. to counter capacity gaps among GCAs in developing They can be set up with government funding and complex infrastructure projects. While projects can be structured to recover costs (especially for implemented with public financing are also supported, PPP projects, where the costs of project preparation these funds tend to have a relatively greater focus on are often recovered from the winning private bidder). developing PPP projects. They can also be created with a thematic focus At the same time, PDFs are often more than pots (e.g. environmentally-friendly green infrastructure of money. They are generally accompanied by projects, such as renewable energy), or a sectoral institutional mechanisms to create public capacity. focus (a transportation or water and sanitation fund). PDFs have typically been set up under PPP units, The table below presents an overview of key design housed in the Ministry of Finance, or under dedicated considerations that must be addressed during the central agencies mandated to handle project establishment and operations of PDFs. preparation (discussed earlier in Chapter 2 under
Purpose and role Sector focus – e.g. Transport, energy, social infrastructure of PDFs Thematic focus – Green projects, projects with climate resilience impacts
Coverage of assistance – Upstream enabling policy formulation, OBCs, pre-feasibility, feasibility, PPP transaction advisory, contract management support
Institutional Governance and approvals framework for PDFs Operating framework and processes for disbursement to implementing agencies
Cost recovery framework
Guidelines for engaging consultants
Eligibility criteria Sectors
Nature and size of projects
Eligible GCAs
Project preparation work already undertaken
Sharing of project preparation costs by GCAs
Project preparation activities for which PDF support can be used
Recovery of PDF support
Limits of Overall limit of PDF support PDF support Limit to individual projects
Limits at various stages of project preparation
Sector caps, if any
Sources of funding Government budgetary allocation for PDFs MDB and donor contribution
Cost recovery
Risk management Risk management and monitoring procedures
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3.2.2. Guidance • PPP vs. traditional public procurement: This study indicates that the majority of PDFs being Key elements of the guidance framework under set up are housed in or administered by PPP units, Project Development Funds are summarised have been enabled by the country’s PPP law (for below: example, in Kenya and Indonesia), and tend to have A. Clarity of PDF objectives, scope of operation, a relatively greater focus on projects amenable to and interface with GCAs is critical. the PPP model. It is also important to recognise B. PDFs should be backed by effective the limitations in making decisions on financing governance, institutional capacity and sources early in the project preparation lifecycle. sustainable financing. PDFs should ideally allow for the decision on financing sources to evolve through the course of C. Support to project preparation financing project preparation if necessary and should remain for sub-national governments should be open to different structures during early stage institutionalised. project development. D. Allied mechanisms for project preparation • Voluntary vs. compulsory: Access to PDFs is need to be developed alongside PDFs. typically provided on a voluntary basis, and GCAs that are reluctant to opt for the PPP model of A. Clarity of PDF objectives, scope of operation, implementation sometimes opt out of project and interface with GCAs is critical. preparation through the PDF. However, the use of PDFs can be incentivised, for instance, by creating For PDFs to be effective, clarity on the strategic clear criteria for budget support based on the rigour objectives underlying their creation, their scope of of early stage project preparation and the threshold operation and their interface with GCAs is crucial. Key quality of feasibility reports. This will incentivise considerations while setting up PDFs are discussed GCAs to use the PDF route. below: • Approach to handling conflicts: Two areas • Sectoral and thematic focus: It may be prudent deserve attention in terms of potential conflicts for governments to direct financing to high priority of interest. The first one pertains to the linkage of sectors and projects above a threshold investment cost recovery of PDFs with project completion. scale, especially in the initial years, to achieve While faster project completion is a legitimate better value for money and create the required objective to be incentivised, this could sometimes demonstration effect. For example, Mexico has lead to a compromise in project preparation for been able to scale up its toll road program and faster project implementation. Conflicts may also mass transit program supported by sectoral arise when the management of PDFs is entrusted focused facilities under FONADIN and PROTRAM. to entities involved in project financing or if the • Scope of support: Spelling out the scope and private partner involved in the operation of the PDF boundaries of project preparation of PDFs is equally also handles downstream project implementation. critical. For instance, in some cases, access to While care must be taken to avoid such conflicts financing from PDFs is made available only for by design, it may not be possible to eliminate all. feasibility studies, and pre-feasibility and outline Checks and balances, in the form of independent business case studies are excluded. This creates reviews, transparent disclosure by PDFs and GCAs challenges when GCAs do not have capacity to on project preparation activities, and restrictions handle these early-stage preparatory studies. PDFs on private partners involved in project preparation may need to be designed to provide flexibility to from downstream implementation, should be built support project preparation activities across the into PDF guidelines and enforced diligently. wider spectrum.
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• Institutional models: An arm’s length separation INDONESIA’S PROJECT DEVELOPMENT FUND of responsibility needs to be ensured between In Indonesia, the Ministry of Finance (MoF) project preparation financing and actual project established its own Project Development Facility preparation. PDFs should be managed like (PDF) under its Director of Government Support corporatised entities, such that they are responsive and Infrastructure Financing Management, to and agile to the needs of GCAs and private investors. assist government contracting agencies in hiring There are multiple models for institutionalising transaction advisors and undertaking feasibility PDFs and project preparation capacity: studies and PPP procurement. Since it was set ––PDFs administered under a PPP unit within up under the PPP Unit, the PDF activities largely the Ministry of Finance, which operates as focus on preparing infrastructure projects to be a gatekeeper for the approval of funds for project developed using the PPP model. preparation, while actual project preparation Indonesia’s PDF has generally been used to (including engaging consultants and transaction provide support to mid-stage activities in terms advisors and conducting studies) is performed of detailed feasibility studies and subsequent by another central project preparation agency transaction advisory, and so far has not been or GCA. This model is prevalent in Indonesia. used for early-stage outline business case ––PDFs administered under a board or committee, preparation and pre-feasibility studies, as which also oversees the central agency these have been financed by GCAs or other responsible for project preparation, as is the case institutions, such as BAPPENAS. Additionally, in the Philippines. actual project preparation is supported by institutions like PT SMI, a public infrastructure ––PDFs administered under an SOE or a development finance institution. Recently, access to funds finance institution (DFI), as in the case of FONADIN for project preparation under the PDF has in Mexico. been opened up to other agencies, such as the • Organisation and staffing: The agency(ies) Indonesia Infrastructure Guarantee Fund (IIGF), charged with project preparation must be in a bid to accelerate the scale and pace of staffed commensurately. This should include the procurement of technical experts that are well- versed in PPP policy, transaction requirements and B. PDFs should be backed by effective governance, contract structures. They also need to be capable institutional capacity and sustainable financing. of formulating and applying guidelines for engaging PDFs need to be supported by effective institutional consultants and transaction advisors on behalf of mechanisms that are well-governed, adequately staffed line agencies. A good understanding of infrastructure and financially sustainable. Key considerations in procurement policies and enactments at the national managing PDFs from an institutional perspective are and sub-national levels, including guidelines and discussed below: regulations governing PPP projects, is also a critical • Governance and oversight: PDFs are typically requirement. governed by independent boards that approve • Sustainable financing: PDFs need to be financially project preparation financing requests from GCAs sustainable and are often set up by governments and issue well-laid out guidelines for financing with support from MDBs. For instance, the PDF approval. The funds are typically disbursed to in Kenya was set up using World Bank technical a central project development agency or GCAs assistance, while the Philippines PPP Center was that are mandated to prepare projects under these set up with the assistance of the Asian Development guidelines. Procurement practices and guidelines Bank (ADB). PDFs are often set up as a revolving for engaging consultants, experts and transaction fund that supports both conventional and PPP advisors are also typically prescribed for the projects, where project development costs are utilisation of funds from the PDF. reimbursed by the successful bidder(s). Even where such cost recovery is attempted, PDFs tend to have lower success rates in the early years. Therefore, committed budgetary support, especially in the early years, is crucial to keep the PDF sustainable.
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THE PHILIPPINES PPP CENTER AND ITS PROJECT DEVELOPMENT AND MONITORING FACILITY (PDMF)
The Philippines PPP Center up the PDMF is to provide funding and facilitate The PPP Center serves as the central coordinating PPP project preparation and monitoring. It provides and monitoring agency for all PPP projects in financing to engage external consultants and the Philippines. It champions the country’s PPP transaction advisors to assist implementing program by enabling implementing agencies in agencies in their pre-investment activities for all aspects of project preparation, managing the potential PPP projects and develop a pipeline Project Development and Monitoring Facility of viable, bankable projects. PDMF can also be (PDMF), providing project advisory and facilitation tapped by implementing agencies for probity services, advocating policy reforms to improve advisory during the bid process, and engagement the legal and regulatory framework for PPPs of independent consultants to monitor the and providing technical assistance in project implementation of PPP projects. preparation and implementation. Following the approval of assistance by the PDMF Through Executive Order No. 136, the PPP Center Committee for a specific PPP project, the PPP acts as the Secretariat of the PPP Governing Board Center sets up a Special Bids Awards Committee, (PPPGB). The Board is the overall policy-making which is tasked with the selection of consultants, body for all PPP-related matters, including the and the Project Study Committee/Project administration and management of PDMF. Monitoring Committee/Project Implementation Thereby, PPPGB is responsible for creating an Committee, which evaluate the deliverables of enabling policy and institutional environment for consultants and advisors, ensuring quality outputs. PPPs in the Philippines. One of the key features of the PDMF is the As part of its mandate to further develop PPPs in establishment of three panels of consultants the country, the PPP Center also undertakes various (both international and national firms) that are initiatives to educate and train the implementing pre-qualified under ADB procurement guidelines, agencies on the general principles and processes namely the Panel of Project Preparation and of PPPs. It conducts trainings and workshops on Transaction Advisory Consultants with 22 PPP basics for GCAs and sub-national governments. members, the Panel of Probity Advisors with At present, there is an increasing emphasis six members, and the Panel of Independent on improving the capacities of sub-national Consultants with 10 members. ADB procurement governments. The PPP Center supports pre- guidelines ensure that there is a quick and effective investment activities through the PDMF to create process for pre-qualification and selection of a pipeline of viable PPP projects. advisors. The actual process of the selection of consultants and transaction advisors is a two- The Philippines Project Development and stage process. The first stage comprises of the Monitoring Facility (PDMF) pre-qualification, selection and retention of a panel of consulting firms under an indefinite delivery The PDMF is a revolving fund created with an contract (IDC) facility for a duration of three years investment of US $849 million from the Philippines (which may vary each time depending on the Government and US $18 million from the discretion of the PPP Center). The second stage Australian Government. of the process is the actual selection of an advisor PDMF is under the administration and or consultant from the panel on a competitive management of the Philippines PPP Center and basis. The selected consultant is then responsible its funding is an integral part of the PPP Center’s for pre-feasibility, project preparation and operations and at the core of the PPP Center’s transaction execution; probity advisory; and/or ability to deliver on its mandate. The aim of setting monitoring of project implementation.
9 As of December 31 2018.
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C. Support to project preparation financing for sub- for preparation activities alone, and are provided national governments should be institutionalised. for infrastructure development within the state or The focus on infrastructure development is province as a whole. In this arrangement, it is up to increasingly moving to sub-national governments. the sub-national government to manage expenditure Many countries are now seeing greater participation efficiently, and ensure contracting authorities have in infrastructure investment by sub-national access to financing for project preparation. governments, vis-à-vis the dominating presence of Alternately, some PPFs that assist sub-national national governments in this sector from years prior. governments have also established dedicated funds This shift in government involvement must be handled to assist project preparation at the sub-national level. with extreme care – where national governments have For example, the Public-Private Infrastructure Advisory had relatively deeper experience to build capacity and Facility (PPIAF), a multi-donor PPF financed by over support project preparation activities, contracting 11 multilateral and bilateral donors and housed authorities at the sub-national level could have within the World Bank Group, has a Sub-National limited resources to prepare bankable projects or Technical Assistance (TA) program, under which even enhance development capabilities. Therefore, PPIAF provides technical assistance activities to sub- it becomes imperative to ensure that contracting national governments by way of capacity development authorities at the sub-national level have adequate initiatives. access to the resources required to prepare projects. In some countries, sub-national governments have One of the ways to achieve this is for national also developed sophisticated mechanisms to address governments to provide budgetary support by way this issue, by way of setting up project preparation of grants to sub-national governments for project funds specific to the state or province. preparation. Typically, these funds are not ear-marked
FACILITIES TO SUPPORT SUB-NATIONAL PROJECT PREPARATION
National interventions Sub-national interventions Governments have established national funds to Select sub-national governments in India have support project preparation and support public established project development facilities to sector capacity in sub-national governments. Two support project preparation, especially in the urban examples of such facilities are Brazil’s Supporting infrastructure sector. One unique example is the Fund to Partnerships Structuring (FAEP) and establishment of the Project Development Grant Mexico’s National Infrastructure Fund (FONADIN). Fund (PDGF) in the State of Tamil Nadu. The fund A unique example covered within the Mexico has been financed with government assistance country case study (see Appendix A) is the and development agencies such as the World Government of Mexico’s federal mass transit Bank, KfW and JICA. The PDGF is used to provide program (PROTRAM), which was created in 2009 grants to carry out consultancy assignments, within FONADIN, to drive scale and efficiency in to operate and manage resource mobilisation the mass transit sector, in line with the national programs, and to implement capacity building, objective of a low-carbon growth plan. Under development and training. The Government of PROTRAM, facilities for financing preparatory Orissa has also established a state level project studies and driving investment in mass transit development fund, in partnership with KfW, to projects were provided to local governments. finance project preparation and the development PROTRAM is funded by national toll road revenues of bankable projects. In addition to funding project and financed partly by MDB loans from the World feasibility studies, it supports the preparation of city Bank and the Inter-American Development Bank. development plans and pre-feasibility studies for The local governments provide the project plan infrastructure projects. and request preparatory financing from PROTRAM. The project goes through strict eligibility criteria and superior standards of project appraisal and review, until it is finally approved by the relevant committees in PROTRAM and FONADIN.
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D. Allied mechanisms for project preparation need In general, PDFs in most countries have been to be developed alongside PDFs. created as part of a wider enabling mechanism for PDFs do not operate in a stand-alone manner catalysing PPPs, including the formulation of PPP and need to be supported with sustained actions laws, frameworks for providing Viability Gap Funding and mechanisms to ensure smooth project (VGF), and for managing fiscal costs and contingent implementation. As discussed in Chapter 2 above, liabilities (FCCL) arising out of government support elements of a conducive enabling environment include requirements for PPP projects. Additionally, wider a favourable policy framework and effective public reforms, such as sector-specific policies, tariff institutional capacity. reforms, restructuring of state-owned enterprises (SOEs), land management and labour reforms, are a critical requirement to facilitate effective project preparation.
ENABLING FRAMEWORK FOR PPPS IN KENYA – Multiple interventions
The Government of Kenya collaborated with • The Project Facilitation Fund (PFF) was created the World Bank in February 2013 under the to support project preparatory studies for PPP Infrastructure Finance Public-Private Partnerships projects. The PFF was established as a multi- (IFPPP) Project to establish a stable, predictable purpose fund to provide financial assistance to: and transparent investment environment, along i) support GCAs in the preparation, appraisal and with a pipeline of finance-worthy projects. The US tendering phases of PPP projects; ii) support $40 million program is aimed at three key areas activities of the PPP Unit; iii) extend Viability of development: i) enabling environment; ii) project Gap Funding to PPP projects; and iv) provide pipeline; and iii) project financing. As of September a source of liquidity to meet contingent liabilities 2018, the program is supporting over 71 projects arising from PPP projects. at various stages of development. Key features of the enabling framework are summarised below: • The Public Debt Management Office (PDMO), a department within the National Treasury, • After the enactment of the PPP Law in 2013, the manages a progressive two-stage Fiscal IFPPP strengthened the central PPP Unit and Commitment and Contingent Liabilities (FCCL) created over 57 PPP nodes10. Under the IFPPP Framework, which is built on both quantitative Project, hands-on, skill-based and project-based and qualitative methodologies to evaluate risks training was offered to strengthen the capacity arising from PPPs. of the PPP Unit staff and the project teams. • The PPP disclosure portal provides considerable Officials could also undertake the APMG’s PPP literature on the existing PPP processes and Certification Program11. all non-confidential information related to PPP projects, and the PPP Unit is mandated to act as a central repository of PPP projects 10 A contracting authority that intends to enter into a PPP arrangement with a private party must establish a PPP node, and undertake continuous monitoring and which is headed by the accounting officer of the contracting comparative assessment (ranking) of PPP authority. projects. 11 The APMG PPP Certification Program is an initiative of the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB), the Islamic Development Bank (IsDB), the Multilateral Investment Fund (MIF), the World Bank Group and the Public-Private Infrastructure Advisory Facility (PPIAF), to provide infrastructure practitioners with a formal accreditation demonstrating alignment with international PPP good practice.
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3.3. PROJECT PREPARATION FACILITIES12 • Relatively recent initiatives: PPFs, including the EBRD’s Infrastructure Project Preparation Facility 3.3.1. Summary (IPPF), the ADB’s Asia Pacific Project Preparation Project Preparation Facilities (PPFs) are a response Facility (AP3F) and the World Bank Group’s Global to address the inadequate availability of a bankable, Infrastructure Facility (GIF), have been launched investment-ready project pipeline in many EMDEs. relatively recently.
PPFs seek to provide financing support to EMDE Apart from financing project preparation at different governments for investing in early stage project stages of the project preparation lifecycle, including preparation and to help them in improving the efficacy pre-feasibility, feasibility, and design, most PPFs of project preparation practices with the eventual goal provide technical assistance and capacity building of reducing time span from project development to support. PPFs are also diverse in terms of thematic financial closure considerably. A number of MDB-led areas, sectoral focus, and geographic scope. They PPFs have been set up with different arrangements operate in a non-reimbursable mode through grants, and regional focuses. The following are examples or in a reimbursable mode, where a portion of costs of the forms PPFs can take: are either recovered from governments or from the winning bidder. • PPFs that pool resources and are jointly managed: These include the EU PPP Project Preparation Facility for the Southern Neighborhood FINDINGS FROM A RECENT SURVEY ON (MED 5P), funded by the European Commission MDB-LED PPFS and led by the European Investment Bank A survey on PPFs operating under 10 MDBs (EIB), in partnership with the European Bank for in May 2018 made the following observations Reconstruction and Development (EBRD), the informing the development of the MDB African Development Bank (AfDB), Kreditanstalt Infrastructure Cooperation Platform’s Guidance für Wiederaufbau (KfW) and the Union for the Note on PPF Structure and Operations: Mediterranean; and the Arab Financing Facility for Infrastructure (AFFI) Technical Assistance Facility, • An increase in the number of PPF initiatives: funded by the World Bank Group (WBG), the Islamic All MDBs surveyed had at least one PPF Development Bank (IsDB), the EIB, the International in operation, and five of them operated Finance Corporation (IFC) and the Arab Fund for multiple PPFs. Over 80% of PPFs had been Economic and Social Development (AFESD). created after 2015, reflecting the ramp-up of PPFs in recent years. • Regional, sub-regional or country-focused PPFs: These include the Inter-American Development • Sustainability and cost recovery: Eight Bank’s (IADB’s) InfraFund, and the New Partnership of the 10 PPFs are funded with a mixture for Africa’s Development Infrastructure Project of internally retained earnings and external Preparation Facility (NEPAD-IPPF). The AfDB’s donor support. Seven of 10 PPFs provided Africa50 initiative provides project preparation project preparation support on a partially capacity within a development-oriented, yet reimbursable model. commercially-operated innovative entity. The • Support beyond PPPs: Seven out of 10 innovativeness of the Africa50 lies in its integrated PPFs support the preparation of both PPPs approach of being a “one-stop shop” which and public sector projects. combines early stage project preparation and • Scale: An estimated US $600 million has development work with long-term debt funding. been committed to PPFs across the MDB landscape since 2015, ranging in size from US $7 million to US $107 million. Nearly 200 project preparation initiatives have been launched since 2015 across primary PPFs, supported by over 200 MDB staff, who are typically structured finance and/or 12 With inputs from the MDB Infrastructure Cooperation Platform’s PPP specialists. The total value of projects Project Preparation Workstream ‘Guidance Note on PPF Structure and Operations’ (November 2018), and ‘Partnering to build a better collectively under preparation under the world: MDBs’ common approaches to supporting infrastructure MDB-led PPF initiatives since 2015 is development’, prepared by MDBs for circulation to the G20 Development Working Group and G20 Infrastructure Working Group estimated at US $50 billion. in September 2015.
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3.3.2. Guidance
Key elements of the guidance framework under PROJECT PREPARATION SUPPORT FROM PPFs are summarised below: PPFS: Kigali Bulk Water Supply project
A. A clear alignment between government The Kigali Bulk Water Supply project is one of objectives and PPF offerings is crucial the first PPP projects in water supply in Sub- to derive value. Saharan Africa. The project was prepared in B. Countries in the early stage of infrastructure line with the Government of Rwanda’s national scale-up should seek support in upstream plans, including the Economic Development activities and in improving public investment and Poverty Reduction Strategy 2008 (EDPRS) efficiency. and Vision 2020, with an objective to achieve universal access to water by 2020. C. EMDE governments should see PPF support as a means to accelerate local The Government of Rwanda introduced a range capacity creation. of measures to facilitate project planning:
i) the establishment of a specialised institution A. A clear alignment between government objectives for managing water supply projects (the Water and PPF offerings is crucial to derive value. and Sanitation Corporation Ltd (WASAC); PPFs address various different facets of project preparation and it is important for governments ii) facilitating close coordination between the to align and set clear objectives of their engagement Rwanda Development Board (RDB), WASAC and with PPFs early on. IFC, and private sector stakeholders; and
The nature and scope of engagement between iii) securing IFC’s support as a lead transaction PPFs and governments is contingent on the stage advisor along with the Infrastructure of readiness of the country’s enabling environment Development Partnership Fund (DevCo)13 and for a ramp-up in infrastructure implementation. Public-Private Infrastructure Advisory Facility For instance, in countries where the enabling (PPIAF). environment, in terms of clear policy frameworks and institutional mechanisms (described in Chapter 2), The institutional reforms, departmental is not in place, governments should engage with PPFs coordination and quality in technical assistance to strengthen upstream activities. Similarly, when were critical enablers of the project’s success. infrastructure plans and project pipelines are not yet The uniqueness of the project (as one of the first in place, the focus of support should be on articulating PPP projects) and its alignment with the national a clear infrastructure vision, creating sectoral plans vision was one of the major reasons for project and developing a credible projects pipeline to be taken ownership at the highest levels of government through the various stages of implementation. and technical assistance from the IFC.
Only when these prerequisites are in place does it become effective for governments to utilise the 13 DevCo is a multi-donor facility managed by IFC and is funded by the Private Infrastructure Development Group (PIDG) downstream project preparation support offered with support from the Austrian Development Corporation by PPFs. Governments may need to make a judicious (ADA), the Austrian Federal Ministry of Finance, the Ministry choice of the PPF with which it wishes to engage, of Foreign Affairs of the Netherlands (DGIS), the Swedish International Development Cooperation Agency, and the UK based on the fit of the PPF’s service offerings, sector Department for International Development (DFID). focus, priorities and needs of the government.
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B. Countries in the early stage of infrastructure scale-up should seek support in upstream activities UPSTREAM-DOWNSTREAM INTEGRATION: and in improving public investment efficiency. The Public-Private Infrastructure Advisory PPFs are often ideally placed to support governments Facility and Global Infrastructure Facility in upstream policy and institutional support, and to The World Bank’s Public-Private Infrastructure advise on regulatory reforms to unlock infrastructure Advisory Facility (PPIAF) is a global facility potential. As a strategy, MDB-led PPFs may need for technical assistance grants dedicated to supplement their offer of downstream project to strengthening regulations and institutions preparation support with upstream technical that enable sustainable infrastructure with assistance to create a conducive enabling private sector participation. Through its environment for PPPs. Combining upstream global collaboration platform comprising of policy advice and support to sector reforms with donors, EMDE governments, MDB technical downstream project preparation efforts can help partners and private sector advisory partners, countries to overcome barriers to sustainable the Global Infrastructure Facility (GIF) helps infrastructure delivery. governments to develop well-structured, Capacity gaps can constrain EMDE governments bankable infrastructure projects and bring them in selecting the appropriate methods of project to market, and expands the market for private preparation. They can expend considerable efforts, infrastructure finance in EMDEs. costs and time to develop stand-alone PPP projects, PPIAF’s upstream focus on the enabling which could then be abandoned and implemented as environment facilitates GIF’s end-to-end a traditional public project owing to frustrating delays support for programs and projects seeking in tendering it as a PPP. They also require capacity to mobilise private capital. From project and expertise to design and implement national inception through to implementation, this frameworks for project preparation. Therefore, PPFs programmatic support focuses on improving focusing on PPP preparation should seek support to project outcomes, sustainability, and make public investment efficient, as an interim step affordability by: (i) instituting sector and SOE towards the successful implementation of PPPs. reforms that improve enabling environments; PPFs also ought to support governments in (ii) drawing on specialist experience and best demonstrating the efficacy of PPP frameworks, practices to develop and execute transactions; to optimise value for money for the government and (iii) harnessing standardisation and on a lifecycle basis, and to facilitate a transition knowledge to reduce project risk and the cost to PPPs and market-led project structures. of preparation. PPIAF and GIF support the successful delivery of infrastructure investments through a range of products and tools that promote the delivery of specific projects, as well as the scaling-up of investments to program and sector levels. Although the facilities can engage independently, they can offer the greatest impact when deployed together. For example, they may work in parallel when a project transaction requires further policy-level enabling work, or sequentially, where PPIAF can support upstream work before GIF adopts a project for final preparation and procurement.
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C. EMDE governments should see PPF support as a means to accelerate local capacity creation. UPSTREAM SUPPORT TO PPP INSTITUTIONS As the experience of developed economies, such AND DEVELOPING LOCAL CAPACITY: The as the United Kingdom and the Republic of Korea, World Bank’s Infrastructure Finance and PPP demonstrates, activities and processes leading (IFPPP) Project to effective infrastructure project preparation Early involvement of the World Bank through are resource intensive but need to be pursued the IFPPP project was instrumental in building continuously over time to produce results. upstream support to PPPs in Kenya. Under MDBs have come together under the Infrastructure the project, the Government of Kenya created Cooperation Platform established during the G20 a legal and institutional framework to support Argentinian Presidency in 2018 to reinforce their role PPPs and, specifically, the Ministry of Transport in supporting the global efforts in the preparation and and Infrastructure in its first-mover PPP financing of infrastructure investments. The Platform program for the road sector through financing seeks to complement the overarching G20 Principles the project preparation. The PPP Act 2013 for the Infrastructure Project Preparation Phase and and the guidelines developed under the IFPPP facilitate greater cooperation among MDBs towards project served as guidance for the transaction effective project preparation in the future. advisors, as well as the Kenya National Highway Authority (KeNHA) in undertaking project Engaging with MDB-led PPFs provides EMDE studies and review for Nairobi-Nakararu (one governments with an opportunity to accelerate of the first-mover projects). The preparatory local capacity creation for infrastructure project studies for the project were financed using the preparation. By working together on an integrated World Bank facility, which helped KeNHA hire program to tackle critical enabling interventions, quality transaction advisors for undertaking the along with select demonstration PPP project project studies. The project also supported the preparation initiatives, EMDE governments can strengthening of the internal capacity of public potentially accelerate local capacity creation, and officials in KeNHA and the PPP Unit through signal their commitment to investors, citizens and specific hands-on skill-based and project-based other stakeholders. For instance, the ADB and other training. partners, including the Government of Australia, have played a key role in the formation of the Philippines PPP Center and the Project Development and Monitoring Facility (PDMF). Similar collaborative efforts with MDBs have seen the creation of enabling PPP frameworks in several other countries.
Further, EMDE governments should better synergise technical assistance (TA) funding streams of MDBs with those available from PPFs. Often, the value of TA funding streams is multiple times the amounts accessed from PPFs, and unlocking these synergies will be critical to deliver impact from MDB assistance. When used well, MDB support can help EMDE governments to absorb and apply leading practices in a contextually relevant manner, to nurture a conducive enabling environment and to create requisite capacities to drive their infrastructure agenda more effectively.
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3.4. GOVERNMENT BUDGETS SEPARATE BUDGET FACILITY FOR PROJECT 3.4.1. Summary PREPARATION – Budget Facility for Notwithstanding the growth of PDFs set up by Infrastructure, South Africa governments (both national and sub-national) and PPFs set up by MDBs, a dominant portion of project The Budget Facility for Infrastructure (BFI) preparation is financed by public spending from is a budgetary reform initiated by the National budgetary allocations by GCAs and line departments14. Treasury to address the weaknesses in This is likely to still be the case in the foreseeable project preparation and the delivery of large future. Yet, very often, granular information on infrastructure projects in South Africa. The spending and outcomes of project preparation from BFI serves as a financing facility that is fully such budgetary allocations is difficult to obtain in integrated into the national budget system. most countries. The facility is established and managed jointly by the National Treasury, the Presidential Given the scale of spending on project preparation Infrastructure Coordinating Commission that occurs using this route, governments should (PICC) secretariat, and the Departments of pay attention to improve the efficacy and impact of Planning, Monitoring and Evaluation (DPME) and budgetary spending by GCAs and line departments on Economic Development (EDD). The facility has project preparation. This section provides guidance on also established the Joint Technical Committee the key principles and actions that governments could (JTC), comprised of senior officials from the take in this regard. National Treasury, the PICC secretariat and the DPME, which manages the detailed technical 3.4.2. Guidance assessment process. The facility provides specific information on the funds utilised Key elements of the guidance framework under towards project preparation and financing government budgets are summarised below: and ensures that fiscal resources are A. Direct a portion of budgets to project committed in a transparent manner. preparation and track expenditure. For the financial year FY 2018-19, the BFI B. Require GCAs to report and disclose spending received 64 large infrastructure project on project preparation as a separate line item. submissions and an estimated funding requirement of US $10 billion. Of these, 38 C. Set and enforce guidelines with which GCAs projects that met submission requirements should comply to access financing for capital were assessed for their Value for Money, spending. socioeconomic rationale and readiness to implement.
A. Direct a portion of budgets to project preparation and track expenditure. Often, governments do not have the ability to track infrastructure project preparation costs, as these are not reported under traceable line items in the budget. Therefore, governments should specifically track budgets and spending for infrastructure project preparation by creating line items in their budgets for expenditure incurred on project preparation. Incorporating clear traceable budgetary line items helps create the foundation for consolidating and reporting expenditure incurred on project preparation, and in establishing a baseline for project preparation expenditures. This will also help governments to track and direct budgetary allocation commensurate with the scale of future infrastructure spending.
14 For example, in Africa, approximately 20-30% of total project preparation funding is through PPFs, whereas this figure is significantly lower in many high-income countries.
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B. Require GCAs to report and disclose spending on project preparation as a separate line item. GOVERNMENT BUDGETARY FUNDS ACCESSED THROUGH CLEARLY ESTABLISHED The next step is for GCAs to report and disclose PROCEDURES – The case of Chile’s National project preparation spending annually, with the Fund for Regional Development (FNDR) infrastructure spending plan and actual capital expenditure incurred reported on a periodic basis. The Government of Chile’s FNDR serves as This way, trends in spending on project preparation a sustainable source of project preparatory can be tracked in a consolidated manner by policy- funding for sub-national governments. The makers and officials involved in infrastructure FNDR is a separate fund created to channel development. This will also help to build the case budgetary funds to sub-national government for stepping up project preparation financing (especially local government) entities for project commensurate with the scale of infrastructure preparation and implementation financing. spending targets and project preparation needs. It is managed by the Subsecretaría de Desarrollo
Regional (SUBDERE) of the Ministry of the C. Set and enforce guidelines with which GCAs Interior and allows regional governments should comply to access financing for capital to prioritise investments. FNDR pools in spending. governments’ budgetary financing and has Very often, GCA capital budgets are approved with been supplemented by multilateral assistance. little concern for the efficacy for project development The FNDR is a systematic process for allocating costs. Governments ought to formulate and enforce funds to municipal governments based on guidelines for handling various stages of project objective criteria for resource allocation. preparation and back this up with a multi-stage review Funds are allocated between regions following process during the course of project preparation. a formula that includes the institutional By making compliance to these guidelines a necessary complexity of the regional government, size of condition for access to capital budgets, services offered, volume of investments etc. The and by creating multi-level reviews by independent FNDR lays out specific guidelines and eligibility and outside agencies and experts, governments criteria for project selection for pre-investment can potentially nudge GCAs into improving the rigour funding, clear procedures for the allocation of and standards in the project development process. funds across sectors and programs, and the methodology for distributing the resources across the regions. For example, only the projects which have been approved as Socially Recommended (RS) or those which have a positive Economic Technical Analysis Results (RATE) score by the competent authorities will be supported under the FNDR facility. The project preparatory support includes financing of the pre-feasibility, feasibility and technical studies, as well as capacity building and training assistance for sub-national government staff. The country’s annual budget law captures the funds allocated and utilised for specific purposes under FNDR.
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4. Infrastructure planning and project prioritisation
4.1. OVERVIEW
Well-planned and prioritised infrastructure investment reforms to strengthen institutions and regulation, they improves productivity, engenders competitiveness experience relatively stronger impacts on productivity and contributes to long-term sustainable economic and economic growth. growth. Studies suggest that a dollar spent on Producing the greatest impact for infrastructure infrastructure yields an estimated GDP increase of investment requires governments to: US $0.05 to US $0.2515 (i.e. generating an economic return of between 5% and 25%). • Formulate medium- and long-term infrastructure plans: This involves a systematic assessment of Nevertheless, the extent of realising the economic critical infrastructure gaps, identification of critical benefit from infrastructure investment varies priorities to drive socioeconomic transformation, considerably across sectors, by regions and by level setting actionable goals around these priorities of regulatory and institutional maturity. Countries at and identifying projects to realise the goals. different stages of economic progress have different infrastructure priorities and relative impacts of • Translating these plans into a prioritised and investment to economic growth, and it is important actionable projects pipeline: While a systematic that infrastructure investment is well-planned and assessment of gaps and identification of efficiently delivered. solutions through the formulation of long-term Typically, developing countries and countries plans is a good starting point, it is by no means transitioning to a more competitive “efficiency- sufficient. While global estimates of infrastructure driven”16 stage of development need to build new investments required to support economic growth capacity to address major deficits in access to and human development lie in the range of US infrastructure, and often see fairly large incremental $94 trillion by 2040 (the GI Hub’s 2017 Global benefits of infrastructure investment. However, as Infrastructure Outlook), the pool of available funds countries mature and become more innovative, basic is limited. Governments must therefore decide how functional infrastructure is more likely to be already to allocate their limited resources for infrastructure in place, and therefore, other factors become bigger development, particularly given that financing competitiveness drivers. In such countries, the gaps are likely to grow in the coming decades. This challenge moves more towards providing resources requires putting in place frameworks and processes to sustain infrastructure, while making investments for translating the long-term priorities and goals for de-bottlenecking where needed. into a credible, prioritised and potentially viable pipeline of programs and projects. Further, the level of investment in infrastructure required to support growth varies widely across regions; in Sub-Saharan Africa, countries require This chapter covers infrastructure planning and an infrastructure spend of 10% of GDP on average translating such plans into a prioritised pipeline (reaching over 25% of GDP in the poorest nations) of projects under two sections: to address infrastructure gaps and facilitate growth, while Asia and Latin America would need 4-5% of • Infrastructure planning (Section 4.1) GDP for new investments17. When poorer countries • Translating infrastructure plans into a invest in infrastructure and this is accompanied by prioritised projects pipeline (Section 4.2)
15 Strategic Infrastructure Steps to Prioritize and Deliver Infrastructure Effectively and Efficiently. World Economic Forum. 2012. 16 According to the World Economic Forum’s (WEF) Global Competitiveness Report, ‘factor driven’ countries are dominated by subsistence agriculture and extraction businesses, with a heavy reliance on unskilled labour and natural resources, whereas ‘efficiency driven’ economies are increasingly competitive, with more efficient production processes and increased product quality. 17 IFC Economics Notes. Note 1 The impact of infrastructure on growth in developing countries. April 2012
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4.2. INFRASTRUCTURE PLANNING A. Governments should prepare long-term infrastructure plans that translate a systematic 4.2.1. Summary baseline assessment into a committed articulation Governments are largely responsible for the provision of priorities, goals and pipeline of projects. of infrastructure and delivery of services in an At a basic level, an infrastructure plan starts with a affordable, inclusive and efficient manner. Within systematic review of a country’s existing infrastructure governments, infrastructure development is dealt with baseline, and seeks to give concrete shape to the by different departments and GCAs. country’s infrastructure aspirations through the Given this context, it is quite likely that project identification of key thematic focus areas, important initiatives of different line departments end up development priorities and specific goals along each addressing the same end-user service need. For of these thematic areas. instance, government departments in charge of The World Economic Forum’s Strategic Infrastructure national highways and railways may be seeking to Planner Framework is a useful tool to assess a address traffic demand on the same corridor through country’s infrastructure readiness. It comprises a new greenfield expressway and a high-speed rail 14 parameters, split into four main groupings: project respectively, when one of these projects could (i) infrastructure quality; (ii) government readiness; suffice. On the other hand, situations also arise where (iii) societal readiness; and (iv) market readiness. critical development priorities are missed between two departments with overlapping mandates. Further, government budgets are limited and there is often a • Quality of land transport (road and rail) need to prioritise one need or one sector over another.
• Quality of ports and air transport Putting in place a framework and processes • Availability and reliability of energy grids to formulate long-term infrastructure plans is and power supply therefore crucial to clarify development priorities
Quality • Availability and reliability in an integrated and holistic manner, and to of telecommunications identify appropriate programs and projects to drive Infrastructure • Quality of water and waste-water development impact. The process of preparing and infrastructure periodically reviewing and updating infrastructure plans is an important prerequisite to drive greater focus and commitment to infrastructure • Rule of law and effectiveness of law-
development priorities. making bodies
4.2.2. Guidance • Government openness and impartiality • Government track record of infrastructure projects Key elements of the guidance framework under Readiness Government Government infrastructure planning are summarised below: • Government willingness to engage A. Governments should prepare long-term with private sector infrastructure plans that translate a systematic baseline assessment into a
committed articulation of priorities, goals and pipeline of projects. • Maturity of civil society
B. Infrastructure planning needs to be Social • Government or public willing to pay anchored in a capable and empowered Readiness public institution.
C. Infrastructure planning needs to occur at all
levels of government and cascade among • Competitiveness of construction GCAs and sub-national governments. industry and supply chain • Access to labour and materials D. Periodic updating of infrastructure plans, Market Readiness reflecting lessons learned, builds credibility. • Access to finance
E. Linkages of the plan with downstream actions is key to effective implementation. Source: Strategic Infrastructure Steps to Prioritize and Deliver Infrastructure Effectively and Efficiently, WEF, 2012
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By evaluating a country’s infrastructure readiness cycles, and bring certainty and assurance against these metrics, governments can obtain a to stakeholders. comprehensive overview of the current state of When prepared under the backdrop of a stable and infrastructure readiness in the country, which can progressive policy framework, infrastructure plans then be used to assess and plan future requirements. support the development of an agile and supportive In addition, the framework can help visualise where private sector ecosystem, comprising developers, the country wants to be with respect to each of these contractors and investors, that responds positively to parameters and to zero-in on the thematic areas of opportunities for investment. focus, qualitative priorities and quantitative goals underlying its infrastructure vision. Infrastructure plans provide directional momentum to address infrastructure deficits and signal priority Infrastructure investments, especially on large reforms and the institutional actions required to complex programs and projects, need to be remove barriers to infrastructure investment. They steered over long periods of time that go beyond force a holistic and integrated view of infrastructure election cycles. The presence of an infrastructure needs, beyond the boundaries of line departments plan, developed in consensus by the government and GCAs within the government, and potentially help agencies involved, helps to set priorities, and identify resolve overlaps and gaps in policies, institutions and programmatic initiatives that go beyond election programs to tackle infrastructure deficits.
Exhibit 4.1 Country-lens review: Practices relating to the preparation of infrastructure plans in select countries
Country Institution mandated to prepare Latest infrastructure plan infrastructure plans
Australia Infrastructure Australia Australian Infrastructure Plan (15 years)
Brazil Ministry of Planning, Budget and Plano Plurianual PPA (2016-19) Management
Canada Infrastructure Canada Investing in Canada 2016 (12 years)
Chile Ministry of Public Works Infrastructure, Development and Inclusion Agenda – Chile 30-30
Kenya National Treasury of Kenya Vision 2030
Indonesia State Ministry of National Development Long-Term National Development Plan Planning/National Development Planning of 2005-2025 Agency (BAPPENAS)
Mexico Secretariat of Finance and Public Credit National Development Plan (NDP) and (SHCP) National Infrastructure Programme
Netherlands Ministry of Infrastructure and Water Structural Vision on Infrastructure and Management (MIWM) Spatial Planning (to 2040)
Philippines National Economic and Development Philippine Development Plan (2017 – 2022) Authority (NEDA)
Rwanda Ministry of Finance and Economic Planning Vision 2020; Seven-year government (MINECOFIN) programme
South Africa National Treasury of South Africa National Development Plan 2030
United Kingdom National Infrastructure Commission National Infrastructure Assessment (30-year Vision document)
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B. Infrastructure planning needs to be anchored set up Infrastructure Australia (IA) in 2008 to support in a capable and empowered public institution. a top-down planning approach. IA has, since 2014, Given the complexity, importance and cross-cutting had its mandate and independence strengthened. aspect of infrastructure plans, the task of formulating, In some cases, the task of preparing the long-term updating and reviewing these plans should be handled and medium-term plans are vested with different by empowered and capable public institutions. A key organisations. For instance, in the UK, the National institutional design challenge is to make planning Infrastructure Commission (NIC) provides expert, institutions credible, independent think-tanks and yet independent analysis on pressing infrastructure be able to foster political commitment for the plans issues, and is charged with preparing the National 18 and the directional advice coming from them . Infrastructure Assessment (NIA) to set an overarching, Governments have typically mandated the long-term vision and recommendations taking a 30- responsibility of preparing infrastructure plans with a year perspective, while the Infrastructure and Projects central planning authority or a planning board. Despite Authority (IPA) prepares medium-term plans for a five- its sub-national governments having the primary year period and also manages and provides regular responsibility for infrastructure provision, Australia updates to the National Infrastructure Pipeline.
INFRASTRUCTURE PLANNING IN THE UNITED KINGDOM: Roles of the National Infrastructure Commission (NIC) and Infrastructure and Projects Authority (IPA)
The National Infrastructure Commission demand flexibility, which could save consumers up The National Infrastructure Commission (NIC) to £8 billion a year by 2030; Transport for a World City, was set up in October 2015 to produce a clear on taking Crossrail forward as a priority, with the picture of the UK’s future needs for nationally aim of submitting a hybrid bill by Autumn 2019; and significant economic infrastructure, to help maintain High Speed North, for the development of a long-term the UK’s competitiveness amongst the G20 nations, strategy for High Speed 3 (HS3), beginning with the and to provide expert, independent analysis and Leeds-Manchester corridor, combined with more advice on pressing infrastructure issues. Although immediate action to improve the performance of key funded by the Her Majesty’s Treasury, it functions road and rail links in the north. at arm’s length and provides independent advice and progress monitoring. It engages independent The Infrastructure and Projects Authority (IPA) experts and has industry leaders The IPA will track and report regularly on the as its commissioners. progress of the government’s infrastructure priorities, including the commitment to invest The NIC has prepared its first National Infrastructure £100 billion in infrastructure to 2020-2021. The Assessment (NIA) in 2018, which analyses the UK’s IPA prepared the five-year National Infrastructure long-term economic infrastructure needs, outlines Development Plan 2016 (NIDP 2016) as a follow- a strategic vision over the next 30 years and sets up to the National Infrastructure Plan 2010 (NIP out recommendations for how the identified needs 2010), and is responsible for tracking and reporting should be met. The NIC will monitor progress on the on the progress of the government’s infrastructure government’s implementation of the NIA. priorities, including the commitment to invest In addition to the NIA, the NIC also undertakes £100 billion in infrastructure to 2020-2021, and detailed studies on critical infrastructure needs. for publishing regular updates to NIP and NIDP, For instance, it has completed detailed studies on alongside the Government Construction Pipeline. Smart Power, covering interconnection, storage and
18 Strategic Infrastructure Planning: International Best Practice. International Transport Forum. 2017
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C. Infrastructure planning needs to occur at all levels of government and cascade among GCAs INTEGRATING INFRASTRUCTURE PLANNING and sub-national governments. AT NATIONAL AND SUB-NATIONAL LEVELS: Though the preparation of national infrastructure The case of Canada plans is handled by national institutions, all Infrastructure planning in Canada is guided key government stakeholders, including critical by long-term perspective plans across tiers of government departments and GCAs, need to be the government. At the federal level, the Investing involved in the process. The national infrastructure in Canada Plan, a 12-year plan for infrastructure plans must reflect the status, roles, and imperatives development, has identified US $135 billion of of sub-national governments. This calls for creating investments on five priorities – public transit, structured coordination and facilitation mechanisms green infrastructure, social development, for the coordination and exchange of information, trade and transportation, and rural and insights and priorities during the course of the northern communities. consultations phase for plan preparation. Integrated bilateral agreements (IBAs) that are signed between the federal and provincial governments are an integral part of the planning process in Canada. These IBAs function as collaborative documents, establishing the terms and conditions through which infrastructure funding would be delivered to the provinces and territories over the period. Planning for projects under IBAs requires provinces and territories to develop and submit multi-year plans that identify potential projects.
With emphasis on the outcomes within IBAs, and with predictable, long-term funding, the provinces and territories can structure their investments in a way that achieves meaningful long-term results. In response to the Investing in Canada Plan, provinces and territories have also, in turn, identified their long-term priorities for infrastructure development through exhaustive provincial plans, using, as a reference, the priorities identified in collaboration with the federal government.
To further integrate planning, provinces use the Investing in Canada Plan and the strategic plans of other sub-national governments. For instance, Ontario’s Long-Term Infrastructure Plan 2017 has been prepared based on plans created by provincial governments in Ontario, such as the Greater Golden Horseshoe (2017), the Provincial Policy Statement (2014) and the Greenbelt Plan (2017), as well as other plans that are under consideration, such as Metrolinx’s draft 2041 Regional Transportation Plan.
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D. Periodic updating of infrastructure plans, It is also good practice to track and review progress reflecting lessons learned, builds credibility. on key milestones identified in the plan. In particular, While infrastructure plans have a time horizon of dashboards identifying progress on select indicators several years (the horizon for long-term plans is often can be a good way to track and report progress. Such at least 20 years), the planning process needs to be dynamic monitoring and tracking on the commitments agile to reflect progress and changes, and should and goals made will help strengthen the planning include timely reviews and periodic updating. For process and contribute to closer linkages between instance, a five-year plan may be reviewed annually, the plan and its delivery. and the preparation of the update of the plan for Such linkages and dynamism are crucial to build the next five years may need to be initiated in the ownership and credibility to the plans prepared, and fourth or early in the fifth year of the previous this continuous and positive feedback loop enriches planning period. and enhances the likelihood of improved outcomes from the planning process.
AUSTRALIA: National Infrastructure Audits by Infrastructure Australia
Until recently, Australia had a tradition of project- out a comprehensive package of reforms focused based planning, without sectoral master plans. on infrastructure planning, delivery, investment and As a federal nation, Australia’s sub-national management. The plan identified four high-level governments retain primary responsibility for aspirations for Australia – enhancing productiveness infrastructure provision. The Australian Constitution of its cities and regions; ensuring infrastructure grants the Commonwealth Government jurisdiction markets are robust, efficient and well-regulated; on areas of national interest, such as defence and developing sustainable infrastructure; regulation of corporations, while states retain control and establishing a culture of robust and transparent on most of their infrastructure. decision-making and delivery across all infrastructure sectors. Responding, in part, to a perception that there was insufficient involvement in infrastructure planning at The Australian Infrastructure Plan is also a reform the national level, the Commonwealth Government document, detailing major changes required has taken a more top-down planning approach in across the energy, telecommunications, water, and recent years with the establishment of Infrastructure transport sectors to meet forward infrastructure and Australia (IA) in 2008, and with its independence growth challenges, while the Infrastructure Priority and mandate strengthened in 2014, IA now has List develops a forward perspective on the specific a mandate to prioritise and progress nationally investments that will be required to meet demand. significant infrastructure projects and reforms. Both documents are informed by Infrastructure Australia’s 2015 National Infrastructure Audit. In 2015, the Commonwealth Government The Australian Infrastructure Plan and the mandated Infrastructure Australia to prepare its Infrastructure Priority List are underpinned by first ever national audit (the National Infrastructure a detailed ‘place-based’ analysis to provide a ‘top- Audit), which is an independent assessment of down’ planning perspective and involve roadshows Australia’s infrastructure needs. The audit will be and consultations with diverse stakeholders. conducted every five years and is aimed at providing recommendations on the governance and policy The Infrastructure Audits complement the Australian reforms required to meet the infrastructure needs Infrastructure Plan and the regularly updated identified by the audit. The Australian Infrastructure Infrastructure Priority List, and taken together, Audit created an evidence base to analyse the these frameworks and processes add greater challenges pertaining to Australian infrastructure. transparency and visibility to the process of project selection and a more comprehensive, integrated A key recommendation of the audit was to draft a and long-term strategic approach to infrastructure 15-year Infrastructure Plan, which IA subsequently development. released in 2016, along with an Infrastructure Priority List in 2016. The Infrastructure Plan is a rolling plan, Source: Strategic Infrastructure Planning: International Best Practice. International Transport Forum. 2017 which provides a vision and roadmap to address existing infrastructure gaps in Australia and lays
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E. Linkages of the plan with downstream actions This linkage is established or incentivised in several is key to effective implementation. ways. In some countries, the linkage of project ideas In addition to periodic reviews, infrastructure plans with national priorities outlined in the infrastructure need to be linked and synchronised with downstream plan is a criterion for access to project preparation activities, including preparation of a pipeline of priority financing from PDFs. Government support for PPP projects. It is important to ensure that the priority projects may require the project to be featured in projects identified for implementation under various the national priority projects pipeline. Linking annual GCAs are synced with the development priorities and budgets to medium-term plans is another possibility, programs identified under the national infrastructure although experience from Brazil, which mandates plans. This ensures the infrastructure projects that are such a linkage, points to the challenges in reaching implemented are in line with the priorities identified. this level of alignment.
BRAZIL: Challenges in linking infrastructure plans with annual budgets
In Brazil, the overall infrastructure planning into account the execution capacity of executing process at the federal level is guided by the Pluri agencies. Also, indicative budget allocations for Annual Plan (PPA – a four-year plan), the Budget investment projects are often not realistic, limiting Directives Law (LDO – annual) and the Annual the prioritisation and effectiveness of resource Budget Law (LOA). Apart from the PPA, multi- allocation. Although the LDO revenue, expenditure, year plans are also prepared by the planning and fiscal balance targets are spelled out in a departments in each line ministry, such as the three-year rolling framework, this framework does National Transport Infrastructure Department not, in practice, link the PPA and annual budgets, (DNIT), or by specialised planning agencies, like as revenue forecasts are often unrealistic, forcing EPL. The PPA is prepared by the Strategic Planning adjustments of expenditure allocations to meet and Investments (SPI) of the Ministry of Planning, fiscal targets. Budget and Management (MPOG), and provides Although budget legislation states that programs a long-term pipeline of projects. and projects that are not in the PPA cannot be The LDO is prepared by the MPOG and the included in the budget, the PPA is easily changed Secretary of the Federal Budget (SFB) as part of to include new expenditure items. Therefore, the budgetary process, and is supposed to link the new projects tend to surface late in the cycle PPA and the LOA, the final law which establishes and be included into the annual budget before the annual budget. However, there are weaknesses it is submitted to congress. Also, individual in alignment between expenditure allocations parliamentary amendments introduced during set in multi-year plans, annual budgets, and the budget approval further distort the link between amounts of investment effectively executed. strategic planning and budget allocation.
The PPA’s programmed investments are With inputs from Back to Planning: How to Close Brazil’s Infrastructure Gap in Times of Austerity. World Bank 2017 sometimes not based on accurate estimates of macroeconomic and fiscal variables defining resource availability and do not adequately take
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4.3. TRANSLATING INFRASTRUCTURE PLANS A. GCA-level master plans, linked to the priorities INTO A PRIORITISED PROJECTS PIPELINE in national plans, are useful starting points to build a projects pipeline. 4.3.1. Summary Having a strong projects pipeline allows governments The first step in translating the vision and objectives to track and consistently achieve progress on from an infrastructure plan into the realisation infrastructure development priorities. It also provides of service delivery goals involves identifying and certainty and assurance to investors, developers and screening potential projects to create a prioritised contractors to support the creation of a supply-side projects pipeline that can produce the highest ecosystem. development impact for investment made. Many governments require GCAs to prepare their Identification of projects can be made more efficient respective plans and these form a good starting point through the formulation of similar sub-national to build a national projects pipeline. At the level of infrastructure plans, and by mandating GCAs to GCAs, project identification typically starts with the prepare their multi-year plans mirroring the priorities identification of an infrastructure gap and service need. identified in these national and sub-national Translation of the gap and service need can be in the infrastructure plans, and to identify the group of form of discrete projects (e.g. a greenfield international projects required to address infrastructure deficits airport for the capital city) or through programs (e.g. in their respective areas. development of trunk highway corridors). Typically, resources available within governments are limited relative to infrastructure spending needs, and therefore, frameworks to prioritise strategically GCA-LEVEL PLANS AS A SOURCE important national projects for support from FOR THE PROJECTS PIPELINE governments through the project preparation and – Mexico, South Africa and Rwanda implementation stages are critical. Governments also In South Africa, the GCAs are required to prepare need to create frameworks that can help them create, their five-year strategic plans and an annual track and monitor the progress of preparation and performance plan, and receive guidance and implementation of these projects through their lifecycle. support in project preparation from national 4.3.2. Guidance level public institutions, such as the National Treasury, Presidential Infrastructure Coordinating Commission (PICC) and the Government Key elements of the guidance framework Technical Advisory Centre (GTAC). are summarised below: In Mexico, GCAs are similarly required to prepare A. GCA-level master plans, linked to the a five-year project roadmap, which must be priorities in national plans, are useful aligned to the national plan. These GCA-level starting points to build a projects pipeline. plans feed into the projects pipeline at the B. Mechanisms to track and monitor projects of national level. national and strategic importance are critical. In Rwanda, project planning is guided by various C. Governments should move to evidence- national level plans, including the National Vision based analysis for prioritising projects. 2020; the Economic Development and Poverty Reduction Strategy (EDPRS 2); the National Medium-Term Strategy for Development; sector- specific strategic plans; and the seven-year government development program. Projects identified by the GCAs and disclosed for a three- year period as part of the budget planning and approval processes are also reflected in the national Public Investment Program. The project pipeline, after the due approval process, is also updated in the Public Investment Management System, which serves as a credible pipeline of projects ready for feasibility or investment funding.
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B. Mechanisms to track and monitor projects progress of these projects in a systematic manner. of national and strategic importance are critical. Many countries have created dedicated institutional As governments build a projects pipeline, they ought frameworks to create, update and monitor progress to put in place mechanisms to track and monitor the on strategically important projects pipelines.
PROJECTS PIPELINE: Institutional roles for tracking and driving implementation
Committee for Acceleration of Priority Infrastructure and Projects Authority, Infrastructure Delivery (KPPIP), Indonesia United Kingdom By virtue of the mandate promulgated in Presidential The IPA holds the government of the UK to account Regulation No.3 of 2016, and Presidential Regulation on the progress of the National Infrastructure Plan No.58 of 2017, on the Acceleration of National in its annual report. Each year, the IPA reports on Strategic Projects, the Committee for Acceleration of the projects which are in the Governments Major Priority Infrastructure Delivery (KPPIP) evaluates and Projects Portfolio (GMPP), a list of the most complex monitors the progress of National Strategic Projects and strategically significant projects and programs. (PSN). Projects on the GMPP receive independent scrutiny, support, and guidance from the IPA, and are required KPPIP monitors the PSN through various processes, to provide regular data returns on delivery progress. covering tabulation data systems and IT systems, the preparation of Cabinet meeting agendas for the Further, the IPA assesses the likelihood of a PSN by the Cabinet Secretary, the preparation by project delivering its objectives primarily through the provinces of Cabinet meeting agendas for the independent assurance reviews and its engagement PSN led by the President, and the preparation and with the project. This is reflected in its Delivery facilitation of follow-up meetings for the PSN by the Confidence Assessment (DCA) rating assigned by provinces. the IPA. DCAs are the IPA’s evaluation of a project’s likelihood of delivering on its objectives, to time and In monitoring and managing information related to on budget. DCAs are reviewed quarterly and change the PSN, KPPIP utilises the Dashboard of Information depending on the challenges projects are facing, Technology System located on the servers of the the outcomes of focused independent assurance Office of the Presidential Staff. This dashboard is reviews, and the actions taken. accessible to all ministries and agencies that are in charge of the PSN to update data and project issues.
Apart from driving accountability through institutional frameworks as discussed above, governments also need to put in place systematic processes to capture, monitor and disclose information on the infrastructure projects pipeline. Establishing a standardised online database and using it to drive efficiency through automating workflows along the project preparation approval cycle can be beneficial. Chile, for instance, has its projects data bank created in the form of a digital registry, with workflows to facilitate and track progress through the various stages of preparation and approvals.
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C. Governments should move to evidence-based CHILE: The Banco Integrado de Proyectos analysis for prioritising19 projects. or Integrated Project Bank (BIP) In many countries, including the US, New Zealand, Chile’s Integrated Project Bank (BIP) forms the England, Australia, Singapore, Chile, Ireland, and underlying backbone for its National Investment several others, Social Cost Benefit Analysis (SCBA) is System (SNI), which is recognised as one of used extensively to assess and prioritise alternative the best public investment systems applying infrastructure projects, particularly those that demand standard and uniform methodologies. significant investments. The ability to perform legitimate, evidence-based Under this system, the GCA that is responsible prioritisation by governments and GCAs is for promoting the project enters the project’s constrained, however, by existing capacity and background online on the SNI. This information resource limitations and, in many cases, conflicting is available to the public via the open digital stakeholder expectations. Many governments make registry, BIP. Upon submission of a project to infrastructure decisions with only basic elements SNI, it is assigned a unique project ID within of project appraisal at hand. As governments seek BIP. After the creation of the project profile, the to prioritise and select projects under conditions of project ID enters the SNI, where a project goes limited information and capacity, rather than revert through various stages of project appraisals. to an ad hoc unsystematic selection, it may be useful During project application stage, the GCA must for governments to develop and apply multi-criteria gather all the required information on the project, analysis, while clearly mapping and addressing such as justification for the investment proposal, stakeholder expectations and concerns, to enable conduct a social appraisal (either a CBA or a systematic prioritisation, avoid mistakes and identify CEA depending on the type of project), verify missing information to improve project preparation that the investment is not duplicated in the SNI, going forward. and prepare a pre-feasibility funding application When GCAs and subnational governments propose form in the BIP. At this stage, admissibility of projects to national governments for funding, they do the project is appraised. The Ministry of Public not always include a full-fledged SCBA or feasibility Works appoints a project investment analyst studies. Faced with budgetary constraints and to assess the completeness of information for demand for funds from a large number of project evaluation and whether the funding institution proposals, governments are often in need of decision- has the required funds in its budget to finance making support within the existing limitations of the the initiative. This activity needs to be completed infrastructure planning system, as well as guidance on within five days. improving data for better project appraisal in the future.
The project record thus created on the BIP is For situations like this, the World Bank has proposed used to track the project development, from initial the use of the Infrastructure Prioritisation Framework proposal through to ex-post project evaluation. (refer to box on following page) as an interim decision- Once the project has been declared admissible, structuring tool, until more sophisticated pre-selection it formally enters the SNI and goes through analyses are available. This ‘stepping stone’ approach a multi-stage evaluation with various filters informs decision-making on project prioritisation, depending on the complexity of the project. compares projects passing strategic pre-screening and which have been subject to basic appraisal, makes space for technical deliberation, and structures the decision-making process when capacity and information is limited but nevertheless sufficient for systematic comparison. The framework encourages better appraisal by fostering discussion of key decision factors for which project data should be improved or gathered in the future. However, the approach does not deliver a definitive list of projects for selection, replace best practices in project appraisal (particularly Social Cost Benefit Analysis), or consider current data deficiencies as acceptable for the long-term.
19 Based on Prioritizing Infrastructure Investment: A Framework for Government Decision Making. World Bank Group. 2016
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TOOL FOR PRIORITISATION: The World Bank’s Infrastructure Prioritization Framework
The Infrastructure Prioritization Framework (IPF) is a As such, this support framework explicitly quantitative multi-criteria prioritisation approach that accommodates policy responsiveness in two ways: synthetises project-level financial, economic, social, through criteria selection, and by leaving a degree and environmental indicators into two indices, social- of freedom in decision-making through multiple environmental and financial-economic, and considers references for judgement (i.e. two indices). In these alongside the public budget constraints for a addition to building space for political deliberation, particular sector. consultation, and professional judgement, the following design ideals were incorporated: The IPF differentiates from other multi-criteria decision tools in four ways. First, it systematically • Strategic relevance of a project at the sector level incorporates policy goals, social and environmental and within the appropriate tier of government; sustainability considerations, and long-term • Systematic project comparison based on development aims, alongside traditional financial quantitative measures, to the greatest extent factors. Second, it is predicated on economic possible; prudence and pragmatism. Third, results are displayed graphically on an intuitive, graphical interface by which • Standard indicators of social value and financial decision-makers can compare alternative investment return to drive project comparisons; and scenarios. Fourth, it facilitates active deliberation of • Transparent output allowing for a clear audit trail. key decision criteria and priorities to improve project appraisal looking forward. A key strength of IPF is that it may be flexibly applied. The framework can incorporate elements from The construction and ongoing development of IPF other common methods, such as expert judgement has been motivated by four factors. First, there and cost-benefit analysis. Expert judgement and are significant challenges facing governments in deliberation come into play via the selection and infrastructure planning, wherein large numbers of definition of criteria, as well as in the selection of infrastructure projects identified in development projects within the budget constraints. IPF can plans are to be implemented under the constraints of also take advantage of financial or partial social scarce public resources, limited institutional capacity, CBA components that are more easily quantified, and time. Second, these difficult decisions are to be measured, and monetised (e.g. net present values made based on available or attainable information. of market-based costs and revenues). Nevertheless, Third, given the imperfect appraisal, projects need IPF’s most important value-add is in relieving some to be evaluated for “social (including environmental) of the burden of determining and justifying the and economic value”, in addition to financial impacts, assumptions required to monetise all benefits which may be difficult to monetise. Fourth, there and costs. is a desire to balance analytical efficiency, derived from standardisation, with policy and political Source: Prioritizing Infrastructure Investment: A Framework for Government Decision Making. World Bank Group. 2016 responsiveness, derived from the selection of decision criteria.
Ad-Hoc / Uninformed Project Infrastructure Prioritization Advanced Project Appraisal Selection Framework
• Limited project-level • Limited institutional and/or • High technical and institutional information technical capacity capacity available
• Inconsistent use of information • Partial project-level information • Detailed project-level information available • Decisions frequently based • Project costs known on non-technical, political • Extensive quantified and • Some information on social, considerations monetised social, environmental, environmental, and other financial and economic effects • Subjective assessment economic effects known
• Decisions based on minimum • Decisions based on extensive relevant information information
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5. Project feasibility, reviews and approvals
5.1. OVERVIEW END-TO-END PROCESS AND GUIDELINES FOR The previous chapter reviewed leading practices PROJECT FEASIBLITY – Multi-Year Programme with respect to preparing infrastructure plans and for Infrastructure, Spatial Planning and translating them into a list of project ideas that Transport (MIRT) can be taken through to project preparation and implementation. This chapter identifies frameworks, The Multi-Year Programme for Infrastructure, processes and mechanisms for translating identified Spatial Planning and Transport (MIRT) project concepts into procurement-ready projects. framework provides a holistic and integrated framework and process to address project Translating a project need into a bankable project feasibility from the early concept definition requires rigorous evaluation and appraisal of the stages to the final stages of approvals for feasibility of project implementation, and often infrastructure and water investments. Projects requires a multi-stage evaluation - starting with under MIRT can be either implemented through a strategic case or concept definition and moving public financing or through PPPs on a Design- through to a pre-feasibility assessment and detailed Build-Finance-Operate-Maintain (DBFOM) feasibility evaluation. The G20 Principles for the basis. In a MIRT track, parties work as the MIRT Infrastructure Project Preparation Phase list out five Committee in a phase-by-phase manner to critical aspects to consider for effective project substantiate the project, with each phase ending preparation: project rationale, options appraisal, with a decision on the subsequent phase. The commercial viability, long-term affordability, and starting point is the Initial Decision to launch a deliverability. MIRT Exploration, which stipulates stakeholder It is important for governments to establish holistic roles and requires identification of financing project preparation guidelines and standards for sources for 75% of the cost of the most obvious project feasibility evaluation, reviews and approvals solution identified. As options are evaluated, though the various stages of feasibility evaluation the MIRT Committee may reach a Preferential and to build rigour in project preparation. Decision and the chosen option is documented with legal requirements and financing methods. For instance, the Netherlands’ Multi-Year Programme At the Project Decision phase, the design for Infrastructure, Spatial Planning and Transport is finalised to enable procurement at the (MIRT) facilitates a holistic and harmonised approach Acceptance Decision stage. to project feasibility. continued...
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Project initiation and concept definition: The Project approvals and processes: The Dutch exploration phase of the MIRT framework Gateway Review Method is based on the Gateway follows a collaborative approach that requires Program in the United Kingdom. Since 2007, over project initiation through a series of political 50 high-risk projects and programs in the and administrative meetings that discuss the Netherlands have been reviewed with very positive development needs, fixing strategic goals, and the results. The Gateway Review is performed as a initiatives to meet these goals. The exploration confidential peer review assessment and provides phases typically comprises the following activities: an independent view on the project progress. evaluating the strategic alignment of the proposed The MIRT project preparation framework is steered concept; options evaluation; and selection of the by good practice procedural guidance and tools, preferred alternative to undertake the detailed such as social cost benefit analysis, preparation project study. of business cases, risk management, project Project feasibility and structuring: The process governance, gateway reviews etc. The Ministry of preparing detailed feasibility studies occurs in of Infrastructure and Water Management (MIWM) the ‘plan elaboration’ phase. Here, the identified has also deployed a learning portal, with published solution at the end of the exploration phase is guidance documents on the MIRT process, as further detailed, evaluating the design, compliance well as a platform for practitioners to share their with legal regulations, financial viability and cost experiences and engage in discussions. benefit analysis, and the socioeconomic impact of the project. At this stage, the project study must culminate into a ‘project decision’, to move to procurement and funding approvals. Here, a final impression of planning, scope and budget is presented to the market.
MIRT Research
MIRT MIRT MIRT Plan MIRT Study Exploration Elaboration Realisation
Initial Preferential Project Acceptance Decision Decision Decision Decision
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A structured approach to project feasibility evaluation 5.2. PROJECT CONCEPT AND PRE-FEASIBILITY typically involves three stages: STAGE
• Early-stage pipeline screening and pre-feasibility 5.2.1. Summary assessment: GCAs, especially in EMDEs, often At the very early stages, complete information lack capacity to translate infrastructure needs into on many elements of feasibility evaluation is not well-defined project concepts that are strategically available. The key objectives of early stage project linked to development priorities. Frameworks evaluation therefore are to: and mechanisms to support GCAs through early • Ascertain the project need’s linkage with overall stage concept definition and project screening development priorities identified in the long-term are immensely useful in building a ‘development- plans, and establish the boundaries and scope of worthy’ projects pipeline. the project;
• Standards for feasibility evaluation and Value • Spell out the envisaged service outcomes and for Money assessment: Harmonised standards access benefits in clear terms, and identify the for carrying out feasibility assessments help range of technical options to address the service build threshold standards and quality in project need; and preparation. It is therefore important for governments to develop guidelines that define • Identify the information and level of project what constitutes good feasibility evaluation preparation efforts required to build a case and and build capacity in GCAs to develop a shared to establish different elements of the project understanding of the same. feasibility.
• Periodic review and approvals: Mechanisms Early stage project ideas and concepts are to consistently build rigour and independence identified from strategic plans or from aspirational in project reviews and appraisals in a multi-stage commitments made by political leaders. Passing manner can help to avoid missing key preparatory these project ideas through early stage screening and requirements early on and getting blindsided by pre-feasibility assessments helps to clarify the project concept, scope and boundaries. Such assessments critical challenges later in the project preparation also help with the evidence-based prioritisation of process. An independent review process can projects which have greater impact regarding the help build quality project preparation and often development priorities identified under long-term contributes immensely to efficient project infrastructure plans. Key dimensions of this concept procurement and implementation. definition and pre-feasibility assessment cover market and demand assessment, technical options, normative estimates of capital costs and operating Accordingly, this chapter is organised under costs, potential revenue streams and an initial analysis three sections: of financing options for the project. • Project concept and pre-feasibility stage Governments should put frameworks in place for (Section 5.2) GCAs to translate long-term plans into clearly defined • Feasibility stage (Section 5.3) project concepts to aid decision-making, and to facilitate evidence-based screening at this stage, • Reviews, audit and approval (Section 5.4) specifically with respect to strategic fit and related considerations.
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5.2.2. Guidance
Key elements of the guidance framework under IMPORTANCE OF SUB-NATIONAL PLANS AND the project concept and pre-feasibility stage EVIDENCE-BASED ASSESSMENT – Role of are summarised below: Infrastructure Australia
A. Planning processes and the ability of GCAs Australia has some very good practices that help to populate the project pipeline with high- in building a healthy pipeline of project concepts, priority projects should be strengthened. which are then taken through a structured B. A structured process and guidelines evidence-based process including multiple for early stage screening and project stages of preparation and evaluation to make identification should be put in place. them implementation-ready.
C. Independence in pre-feasibility and early • Sub-national plans which feed into the stage evaluation is recommended. national project pipeline: Australia’s sub- national governments have a strong planning tradition in place, with long-term visions and A. Planning processes and the ability of GCAs to strategy prepared at the state and regional populate the project pipeline with high-priority levels. For instance, the 20-year Infrastructure projects should be strengthened. New South Wales’ State Infrastructure Identification of early stage project concepts and their Strategy and Infrastructure Victoria’s subsequent evaluation is effective when the process Infrastructure Plan are comprehensive plans of preparing long-term plans to identify infrastructure prepared at the state level, while the Greater gaps and medium- to long-term priorities are in place. Sydney Region Plan 2018, Plan Melbourne 2017–2050, ShapingSEQ 2017 for the South The practice of formulating such long-term plans East Queensland region and the 2017 Perth should help ensure that projects are systematically @ 3.5 million Strategy provide comprehensive prioritised based on an assessment of baseline sub-regional land use planning and service delivery and the gaps vis-à-vis the goals and infrastructure frameworks. All the plans priorities set in such long-term plans. For instance, identify projects and feed into the national in the case of urban water supply projects, the level projects pipeline tracked by Infrastructure of access deficit in terms of connection, duration of Australia. supply, volume of water supplied, and prevailing user charges can help GCAs in identifying and detailing • Infrastructure Australia’s Infrastructure specific project ideas that seek to accurately address Priority List tracks projects at the gaps and access needs. conceptualisation stage: Infrastructure Australia tracks and updates a pipeline The central agencies that are charged with creating of nationally significant projects – the and tracking project pipelines need to engage with Infrastructure Priority List (IPL). Projects and GCAs at national and sub-national levels to refine initiatives which aid in addressing nationally and build quality into project proposals. For instance, significant challenges are included in the Infrastructure Australia works closely with subnational national IPL and are given focused attention governments in building a projects pipeline that can be and debottlenecking to move forward. To taken through the various stages of project evaluation support projects at the conceptualisation and also maintains a well-updated Infrastructure Priority List (IPL). stage, Infrastructure Australia also permits ‘initiatives’ to be added to the IPL, which are essentially priorities that have been identified to address a nationally significant need, but require further development and rigorous assessment to determine and evaluate the most appropriate option for delivery. continued...
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Projects are then evaluated in stages through It originated from the improvements in project a well-defined framework, the Assessment performance achieved by the Highways Agency Framework, which details the process and since 2006 through a review and staged criteria against which projects are evaluated. improvements of their governance and program structure, supported by improved data and • Disclosure of information on the projects strengthening capability. pipeline at multiple levels: Australian governments regularly monitor and The Routemap is an aid to strategic decision- disclose details of ongoing and proposed making. It supports the alignment of the sponsor infrastructure projects through multiple and client organisation’s capability to meet the mechanisms. While state and national challenges during initiation and delivery of individual statutory authorities publish a project. It provides an objective and systemic updates in their annual reviews, the National approach to project initiation founded on Infrastructure Construction Schedule is an a set of assessment tools that help determine online portal which also provides information the complexity and context of the delivery on major infrastructure projects committed environment, and the capability of current and to by governments across the country in a potential sponsors, clients, asset managers and dynamic, easy-to-use manner. the infrastructure market.
The Routemap contains detailed checklists B. A structured process and guidelines for early to use during the initial assessment steps, stage screening and project identification should advice on how to perform the gap analysis, and be put in place. advice about what to include in the plans for an enhanced project environment. The components Governments should develop and disseminate very of the Routemap are: clear and relatively simple frameworks for early stage screening and project identification. In most countries, • Complexity Assessment: through the Delivery early stage screening and project identification is often Environment Complexity Analytic, a set of 12 the responsibility of GCAs and hence building their factors that determine complexity. capacity to handle this task effectively is critical. • Capability Assessment: of the sponsor, asset GCAs can create guidance tools and capacity building manager, client, and market. programs for early stage project evaluation and to • Align for Success: covering governance; form well-defined project concepts. For instance, execution, organisation design, and the United Kingdom launched the Project Initiation Routemap in 2018 as a structured approach procurement; risk management; and asset to support early stage project definition and management. conceptualisation.
Components of the Project STRUCTURED APPROACH FOR PROJECT Initiation Routemap INITIATION – The Project Initiation Routemap, the United Kingdom
The Project Initiation Routemap is a structured Same A y t complexity Sponsor ss i e x s approach to setting up projects for success le s approach p Asset C m a p o Manager and is the IPA’s primary tool in supporting the a C Same b s but more i s l i initiation of projects across government. From e complex t s y s 2018, all major projects are assessed for their A Complexity Capability Client need and suitability for applying the Routemap New to to guide conceptualisation. The Routemap is Organisation Align for Market Success a response to the recognition that sponsors Risk Asset and clients of infrastructure projects have to Management Management E Procurement Requirements n D h e a l Organisational establish an appropriate delivery environment, n iv Design Governance & ce e C m r Execution s h e Strategy ap ec n G to avoid the causes of failure and to create k ts y tif P en lan Id foundations for project success. Enha nts
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C. Independence in pre-feasibility and early stage evaluation is recommended. Pre-Feasibility Studies (PFS) for large-scale As projects move from concept definition into the projects were introduced in 1999 and formalised pre-feasibility level of evaluation, it may be useful to in 2006 to improve rigour in project preparation. separate the project sponsor and feasibility evaluator The PFS involves a short and brief evaluation of or reviewer to build independence and expertise into the projects as an input to the budget decision. project evaluation. All new projects with total costs amounting to 50 billion KRW (about US $50 million) or more Where the GCA has strong capacity to undertake must have a PFS. project preparation, such separation of project development and implementation roles can be done The PFS initiative was a response to the within the GCA by getting different departments to criticism against the feasibility studies prepared handle these functions. However, in some cases, it by line ministries. Prior to the establishment may be useful to have independent agencies handling of the PFS program, projects were approved early stage feasibility assessments. without a proper check on the project’s viability or cost considerations. This is evidenced by For instance, Korea’s approach to assign a study undertaken of the feasibility studies accountability for the conduct of pre-feasibility prepared during 1994-1998, which found that all studies to an independent agency (see case example but one of the 33 projects had been evaluated below) has led to positive outcomes. Two useful as feasible. This, in turn, led to several concerns, lessons emerge from the Korea experience which including the selection of unviable projects, cost have implications for establishing systems for escalation and time delays. For instance, the project preparation. Firstly, using an external agency, baseline cost of the Seoul-Busan High Speed i.e. independent think-tanks, academic institutions, Rail (KTX) project had more than tripled from 5.5 consultants or even a central project development trillion KRW (US $5.5 billion) to 18.5 trillion KRW agency, appears to bring benefits in terms of expertise (US $18.5 billion). and independence in project feasibility evaluation. Secondly, having multi-stakeholder reviews at different The PFS is undertaken by PIMAC at the request stages of the project evaluation process allows of the GCAs and/or the Ministry of Economy for greater rigour in evaluation, something that is and Finance (MOEF) and must be completed discussed separately later in this chapter under the within a period of six months. The PFS assigns section on project reviews and approvals. analytical hierarchy process (AHP) weights to different facets of evaluation: economic analysis (35-50%), policy analysis (25-40%), and balanced IMPACT OF RIGOUR IN EARLY STAGE regional development (25-35%). If the AHP score EVALUATION – Pre-Feasibility Studies (PFS) is ≥ 0.5, a project is appraised as passing the by PIMAC, Republic of Korea pre-feasibility test. The Republic of Korea’s project preparation The independent review process, with clear framework has evolved rapidly since the and transparent assessment criteria, has 1997 Asian Financial Crisis, with emphasis helped in the early identification of unviable on strengthening its public investment proposals and has led to significant cost management processes to incorporate savings. With the introduction of the PFS and independent transparent reviews and a sharp stringent guardrails, the share of projects focus on total cost management, including deemed feasible fell in the period following the the use of robust quantitative frameworks introduction of the PFS. About 434 of the 685 for Value for Money analysis. While line projects reviewed by PIMAC since then have departments largely drive project feasibility and been deemed feasible. The introduction of implementation, setting up and vesting powers the PFS process is estimated to have enabled in PIMAC to conduct pre-feasibility studies budgetary savings of KRW 141 trillion has helped to augment capacity and create (US $101 billion) to 2017. necessary guardrails to facilitate greater rigour and integrity in project preparation.
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5.3. FEASIBILITY STAGE
5.3.1. Summary 5.3.2. Guidance This stage involves a detailed evaluation of the project feasibility and seeks to comprehensively facilitate Key elements of the guidance framework under decisions regarding the investment and financing of the feasibility stage are summarised below: projects. A full feasibility report typically addresses A. Frameworks and guidelines should the following aspects20: be implemented to facilitate • Project need and boundaries, service outcomes comprehensiveness of the feasibility and demand projections evaluation.
• Technical configuration and feasibility B. The PPP model of implementation will need scrutiny and analysis of additional elements • Social and environmental impacts in the project feasibility evaluation. • Policy, legal, regulatory and institutional analysis C. Framework Contracts on the use of • Financial and economic feasibility consultants can help build efficiency.
• Value for Money analysis and affordability considerations A. Frameworks and guidelines should be • Government support requirements and implications implemented to facilitate comprehensiveness for fiscal costs and contingent liabilities (FCCL) of the feasibility evaluation.
• Project structuring and risk allocation The use of frameworks and guidelines is a recurring theme in terms of leading practices for feasibility • Consideration of the use of a PPP form of evaluation. Given the breadth and depth of issues procurement and the associated project that are typically evaluated at the detailed feasibility implementation arrangements stage for infrastructure projects, the use of standard • Broad terms of the bid process, documentation frameworks and the adoption of guidelines for the and contracting preparation of feasibility reports are crucial enabling aspects to improve scale and rigour in project • Market attractiveness and bidder interest preparation. Guidelines should, more specifically, • Roadmap for implementation cover the approach to each of the five critical aspects listed under the G20 Principles for the Infrastructure Project Preparation Phase – project rationale, options appraisal, commercial viability, long-term affordability, and deliverability.
A number of countries have put into place guidelines and templates for harmonising the project feasibility evaluation. For instance, the United Kingdom’s Five Case Model enables a shared understanding of both the phases and dimensions of feasibility evaluation. Similarly, several countries, including Australia, Canada, South Africa, and Korea, have adopted similar guidelines and frameworks for feasibility evaluation.
20 Illustrative coverage assuming implementation using the PPP model.
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STRUCTURED FRAMEWORK FOR A MULTI-STAGE FEASIBILITY EVALUATION – Five Case Model, United Kingdom
The Five Case Model is the approach for developing The Five Case Model provides discipline and business cases recommended by HM Treasury, a structure to arrive at the best possible decision the Welsh Government and the UK Office of for proposed infrastructure projects. In simple Government Commerce (OGC) and has been widely terms, the model has five cases and the purpose used across government departments and public of each case is to address specific questions and sector organisations for over a decade. provide evidence to satisfy the approver or funder, as shown below:
The Case The Question What the business case must demonstrate
STRATEGIC Is the project needed • Will it further the aims and objectives
• Is there clear case for change
ECONOMIC Is it value for money • Has the range of options been considered
• Is it the best balance of costs, benefits and risks
COMMERCIAL Is it viable • Is there a supplier who can meet our needs
• Can we secure a Value for Money deal
FINANCIAL Is it affordable • Are the costs realistic and affordable
• Is the funding available and supported
MANAGEMENT Is it achievable • Are we capable of delivering the project
• Do we have robust systems and processes in place
The business case evolves as the project • The full business case (FBC) is the final preparation for the project progresses along three technical document at the outcome of the stages: procurement process and provides a final check on affordability and Value for Money, the • A strategic outline case (SOC) is prepared at the contract details, a full delivery plan and benefits conceptualisation stage with the objective of realisation. ascertaining a strategic fit and making the case for change. At this stage, a shortlist of potential Individual central government departments and affordable options is identified, along with local governments undertaking non-major projects management capacity and capability to deliver. are not bound by project preparation guidelines provided by HMT. However, given the benefit of • An outline business case (OBC) involves a standardised approach to project preparation, a detailed appraisal of options, determination most departments have designed their internal of Value for Money, preparation for procurement, project processes on the basis of the guidelines confirmation of funding and availability, and prescribed under the Five Case Model. a detailed management plan for delivery.
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B. The PPP model of implementation will need Success in PPP projects is determined by a mix scrutiny and analysis of additional elements in the of factors and complete reliance on quantitative project feasibility evaluation. techniques to compare Value for Money against It is well understood that projects envisaged for other procurement models has not fared well in the implementation as a PPP require scrutiny of additional successful screening of projects. Many countries now elements vis-à-vis those that are to be implemented adopt techniques that combine qualitative aspects under public procurement. There are two areas where and methodologies, often based on country specific the use of tools and frameworks can significantly help policy drivers and areas of focus, with quantitative in informing decisions. techniques to screen projects for the PPP model of implementation. Based on a review in partnership with PPP project screening the GI Hub and the OECD of screening practices and PPP projects are typically more complex than similar lessons learned across countries, the World Bank has 21 publicly procured projects, and require substantial developed a PPP Screening Tool (PST) for supporting upfront project development expenses. There is, governments in upstream project selection, with therefore, a need to understand a project as much a view to optimise efforts on project preparation and as possible before making a decision to undertake to improve the success rate of projects that expensive feasibility studies, project structuring and go through a bidding process. procurement.
21 The toolkit may be accessed at: https://pppknowledgelab.org/tools/ tools-assess-whether-implement-project-ppp#ppp-screening-tool
PPP UPSTREAM PROJECT SELECTION SUPPORT – World Bank’s PPP Project Screening Tool
The PPP Project Screening Tool (PST) is a user- The scoring methodology is based on weighted friendly Microsoft Excel-based tool that can be scores to the responses provided. However, to applied by contracting authorities, PPP units and prevent the manipulation of responses, controls practitioners to evaluate a project’s suitability for are embedded in the tool to ensure scores are procurement through the PPP route. PST evaluates moderated if responses were manipulated. PST a project both from a qualitative and quantitative delivers a score and comments on the project’s basis, and is flexible to the level of information strengths and identified areas of improvement. available. In addition, it provides decision support in the form of identifying pre-requisite actions and potential It is designed to be operated at the pre-feasibility deal-breakers, and provides other suggestions study level of information along six dimensions, based on the project’s strengths and weaknesses. namely Strategic Suitability, Preliminary Feasibility, Risk Assessment, PPP Suitability (VfM, Market Appetite), Fiscal Affordability and Institutional Capability (details of these six dimensions can be found in the table on the following page). The tool is, however, flexible to be applied in situations where less information is available; e.g. at concept note stage. The tool has a list of questions across six substantive parameters, with some parameters evaluated based on a mix of qualitative and quantitative processes.
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Strategic Preliminary Risk Assessment PPP Fiscal Institutional Suitability Feasibility Suitability Affordability Capability
• Alignment • Technical • Market/demand • VfM • Extent and • Institutional with nature of capacity • Environmental • Off-taxer • Market government government appetite • Preparedness priorities • Social • Forex fiscal support of contracting • Identification • Economic • Environmental • Quantification authority of service and social of fiscal • Financial • Project need support • Delay in land execution of • Legal • Assessment acquisition contracting of delivery authority • Financing options • Design and • Scoping of construction project • Operation and maintenance
Value for Money analysis • Better data is needed on PPP and major For many governments, the potential to achieve infrastructure investment project outcomes. relatively greater value for money over other public Quantitative approaches to VfM analysis and procurement modes is often a guiding factor in the risk analysis more generally could be improved decision to implement projects using the PPP model. significantly by more systematic collection of However, even in countries with well-established PPP data on actual PPP project outcomes, and ex-post programs, the approach to and use of this analysis assessment of VfM achieved in practice; and is evolving, and is often the subject of debate. • Ultimately, VfM analysis should be integrated with Countries trying to move to systematic VfM analysis overall public investment planning. face challenges in developing and implementing appropriate methodologies. Key lessons from a World Bank Institute study22 on VfM practices are summarised below: VALUE FOR MONEY ASSESSMENT – Republic of Korea • Governments need to strike the right balance The Republic of Korea introduced the Value for between qualitative and quantitative approaches, Money (VfM) assessment after the introduction particularly in new PPP programs, where there is of its PPP Act in 2005. PIMAC is entrusted very limited data available to inform assumptions with the task for conducting the VfM test for for quantitative analysis, and in some cases, a lack unsolicited proposals, while for a solicited PPP of capacity to implement complex risk analysis; project, the VfM test is done by a competent • Governments should be realistic about the nature authority and reviewed by PIMAC. The VfM of quantitative VfM analysis. Quantitative analysis test is used to determine if a project is suitable can be useful to inform decision-making, but should to be implemented as a PPP and is done in be understood and communicated more as a tool both quantitative and qualitative terms. It is to consistently and systematically assess the conducted in accordance with the Guidelines combined result of a set of assumptions than as for the Implementation of VfM Test/Review of a scientific process that provides “proof” of VfM; Proposal for Unsolicited Build Transfer Operate (BTO) Projects. • Thorough risk analysis is crucial to successful PPPs. Whether or not quantitative VfM analysis Under the quantitative assessment, the is carried out, sound risk analysis is crucial to private finance initiative (PFI) is compared achieving value from a project both in its design with the Public Sector Comparator (PSC). In a and implementation and to avoid fiscal surprises; qualitative assessment, the allocation of risks (construction, operation risks, etc.), improvement of service qualities, and other effects and 22 Value-for-Money Analysis - Practices and Challenges: How Governments Choose When to Use PPP to Deliver Public continued... Infrastructure and Services. World Bank and PPIAF. 2013.
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C. Framework Contracts on the use of consultants positive externalities, including promoting the can help build efficiency. financial market, are considered. When the Project preparation in most countries involves the quantification of project risk transfer is not use of external experts and consultants, and it satisfactory, those qualitative effects are not would be useful for governments to build efficiency, incorporated into the overall VfM assessment. transparency and quality thresholds in the process Objectivity, consistency, and independence, of engaging consultants. as well as professional expertise, are important PPP units and central project development agencies elements in conducting VfM tests. The VfM test in several countries have prescribed guidelines for the is carried out by a multi-disciplinary research engagement of consultants for a variety of project team under a Project Manager from the Korea preparation activities, including pre-feasibility and Development Institute (KDI), along with experts outline business case feasibility studies, full feasibility with relevant skills and expertise in demand studies, and PPP transaction advisory. forecasting, cost estimation, engineering and accounting. Five interim review meetings are EMDE countries in the early stages of PPP project held during the VfM test. The duration of each preparation that do not have a vibrant domestic project’s research should take up to six months consulting market ecosystem tend to face significant and the same methodology and procedures are challenges in attracting good experts and consulting applied both to the VfM test and the Review firms to participate in one-off project development of Proposal. initiatives. A programmatic approach to PPP project development supported by a well-planned consultant The VfM test sets the bottom line to meet the engagement framework can help attract international condition of ‘VfM≥0’ for project approval. VfM consulting firms to invest in building local capacity reports are used as an important reference and can potentially help in bridging the gap in the local when the tender evaluation committee conducts consulting service provider ecosystem. their work and provides useful information during the negotiation process. They are also used as reference when ex-post VfM tests are conducted.
CONSULTANT EMPANELMENT AND USE OF FRAMEWORK CONTRACTS – The Philippines PPP Center
The Philippines PPP Center, under the PDMF, The second stage of the process is the actual has established three panels of consultants selection of an advisor or consultant from the panel (both international and national firms) that are on a competitive basis. pre-qualified under ADB procurement guidelines, Under the guidelines, consultants for project namely the Panel of Project Preparation and preparation from the panel are invited to submit Transaction Advisory Consultants with 22 a simplified technical proposal. The project is members, the Panel of Probity Advisors with awarded on the basis of the evaluation of the six members, and the Panel of Independent technical proposal, through a quality-based Consultants with 10 members. ADB procurement selection process with a fixed budget23. The guidelines ensure that there is a quick and effective selected consultant is then responsible for pre- process for pre-qualification and selection of feasibility, project preparation and transaction advisors. execution. The guidelines also provide steps the The actual process of selection of consultants PPP Center should adhere to for the evaluation and/or transaction advisors is a two-stage process. of consultants. The first stage comprises of pre-qualification, selection and retention of a panel of consulting firms under an indefinite delivery contract (IDC) facility for a duration of three years (which may vary each time depending on the discretion of the 23 Method of procurement in which the cost of the budget is fixed. PPP Center). The consultant which achieves the highest technical score shall be invited to negotiate.
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5.4. REVIEWS, AUDIT AND APPROVAL REVIEW AND APPROVALS WORKFLOW – 5.4.1. Summary National Investment System (SNI), Chile and A multi-stage review process precedes infrastructure the Gateway Review Process, the United project approvals in several of the countries studied. Kingdom Although this is necessary given the complexity of infrastructure projects and the number of factors National Investment System, Chile affecting investment decisions, if it is not handled Chile’s National Public System of Investments well, it can often lead to administrative delays and (SNI), an advanced appraisal system, is a pioneer increased costs and time for project preparation. initiative in strengthening and standardising project approvals. It was created in 1975 and Therefore, there is a need to balance considerations is jointly administered by the Ministry of Social of efficiency and rigour while formulating the review Development (MSD) and the Ministry of Finance and approval processes underlying infrastructure (MOF). As per Chile’s Law Decree 20530, the projects. Further reviews may need to involve capital budget submitted by the Ministry of appropriate stakeholders taking the country context Finance to congress should consider all projects into account. A process audit should be embedded assessed and approved in the SNI. The objective into infrastructure project preparation as a means of the system is to identify the best projects to drive transparency, accountability and efficiency offering the highest social return. The system improvements. allows the projects which are tracked on Chile’s online project databank (BIP) to compete with each other for budgetary support. At each stage Key elements of the guidance framework of appraisal, an Economic Technical Analysis under project reviews, audit and approval are Results (RATE) score is issued. Only projects summarised below: attaining a socially recommended (RS) RATE A. With well-defined workflows, multi-stage score move to the next stage. Positives of the reviews help build rigour and efficiency. review process include:
B. Project reviews should involve all relevant • A centralised project information system: stakeholders. The BIP serves as a central repository of C. PPP project preparation processes should projects, discloses the RATE score assigned be subject to audits to drive transparency to the project at each stage, and aids the and improvements. appraisal workflow. • Facilitates rigour in project evaluation: The SNI undertakes an independent ex-post 5.4.2. Guidance evaluation of projects following construction A. With well-defined workflows, multi-stage reviews and during operations, where projects are help build rigour and efficiency. reviewed on adherence to time, cost and the process standards envisaged. The challenge of delays in decision-making during the course of infrastructure project preparation is real and • Information on social prices: MSD annually needs to be tackled by developing streamlined time- determines the social prices of labour supply, bound processes along with the use of automation the currency and discount rate, and other where feasible. prices commonly used in the Cost Benefit Analysis (CBA) or Cost Efficiency Analysis The SNI system in Chile is a good example of (CEA) to standardise the cost estimation a rigorous multi-stage process which works on top process. of the online Integrated Project Bank (BIP). Similarly, in the United Kingdom, the Gateway Review process • Guidance manuals: The MSD has issued involves a comprehensive and mandatory peer review guidance manuals on the process of project process at key decision points in the project lifecycle preparation, methodology and tools for the and is a leading practice that has been replicated in CBA and/or CEA assessment, and these are several other countries, including in the Netherlands updated regularly based on inputs from the and among the sub-national governments of Australia. ex-post evaluations of projects. continued...
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In Rwanda, given the sensitivity to increases in tariffs The SNI system thus provides a platform for and user charges across infrastructure sectors, the the independent appraisal of projects and utilities regulatory authority (RURA) is involved in reduces conflict of interest of the preparation decision-making, particularly with respect to tariff and approval entities. The MSD undertakes design and levels. the detailed appraisal, and checks the appropriateness of the methodology applied and the reliability of information used to WIDER STAKEHOLDER INVOLVEMENT IN calculate the RATE score. REVIEWS – Involvement of regulators in project reviews, Rwanda Gateway Review Process, the United Kingdom The UK has instituted a comprehensive and In Rwanda, project approvals follow two mandatory peer review process at key decision distinct steps according to the type of project points in the project lifecycle to enhance procurement as described below. A key aspect the quality of project preparation and to set to note is that, in the case of PPP projects, the government expectations in project delivery. The Rwanda Utilities Regulatory Authority (RURA) is Office of Government Commerce (OGC) Gateway consulted at the feasibility stage on user tariffs ReviewTM process was introduced in 2000 and the methods underlying their fixation and after several project failures in the UK and the revision. RURA’s recommendations also form a re-evaluation of the government’s effectiveness critical input in the approval of feasibility reports. in projects and program delivery. The Gateway • For public investment projects, the project Review process aims to deliver a ‘peer review’ approvals are integrated as part of the of projects at critical stages in their lifecycle, planning and budgeting exercise for central to provide assurance that they can progress government investment. The projects are successfully to the next stage. The Gateway assessed twice by the Public Investment Review process covers six ‘Gates’, numbered Committee (PIC) or Local Governments from 0 to 5. These gateways cover aspects Public Accounts Committee (LGPAC) during from strategic assessment of the program to the project preparation lifecycle; first, by examining the full business case of the project, conducting a full feasibility study and second, as well as monitoring the operations of a project. in order to proceed with the tender. For sub- Principles of the Green Book are incorporated national projects, the Local Administrative in Gates 1 and 2. For all major projects, Her Entities Development Agency (LODA) acts as Majesty’s Treasury approvals are required a technical secretariat to LGPAC and assists at Gates 1, 2 and 3. The standardised and structured approach of the UK’s Gateway Review in screening projects. The findings of the has been adopted in various other jurisdictions screening are submitted to LGPAC, which (with contextual fine-tuning), including in advises on investment priorities to the District Australia and the Netherlands. Council (which has the authority for final project approval).
• For PPP projects, the projects are submitted B. Project reviews should involve all relevant to the Rwanda Development Board (RDB) stakeholders. for evaluation and registration in the PPP database. RDB forms a project-specific The review process should be a multi-stakeholder Technical Committee (TC) for review of the process to ensure that all key issues in the project are full feasibility report. The TC comprises dealt with comprehensively. In Korea, for instance, representatives from the RDB, a project PIMAC, an independent think-tank, is charged with officer from the contracting authority, the review of full feasibility reports and conducting VfM analysis for PPP projects. Similarly, the MIRT representatives from MINECOFIN (to review framework in the Netherlands involves a wider set and provide approvals on fiscal commitment of stakeholders throughout the project preparation and contingent liability), RURA (which advises journey by bringing in project owners, citizens, on tariffs where user tariffs are to be used), other ministries and regional partners (provinces, and other relevant ministries and agencies, municipalities, transport regions, district water boards, including the Ministry of Justice.
NGOs and businesses) during the course of project continued... review and approval.
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Further, the PIC also evaluates the feasibility This has been one of the major reasons for delay report from an economic feasibility in project implementation in these countries. and strategic investment standpoint. Under its Investment Partnerships Program Recommendations from the TC and PIC are (PPI), the Government of Brazil has created an submitted to the PPP Steering Committee institutional mechanism to ensure a time-bound for projects which are to be delivered using audit review of each project prior to project the PPP structure. In the case of local level bidding. The Federal Court of Accounts (TCU) projects, these are assessed by LGPAC twice, conducts accounting, financial, budgetary, both at the pre-feasibility and full feasibility performance and equity audits and inspections stage. to verify the legality and legitimacy of governmental actions, as well as the application of subventions, subsidies and exemptions. C. Project preparation is often subject to process Under the PPI, the government targets a 90-day audits to drive transparency and improvements. window for the TCU approval process. A number of countries provide for process audits, In the case of the South Integration Highway generally post procurement, as a means to drive project, the project studies were submitted transparency, accountability and compliance with for review by the TCU on 31 July 2017. The the legal framework and guidelines issued. TCU undertook a detailed assessment of The purpose of the audit is to document non- the processes followed by nine months of compliance and deficiencies related to the project deliberation with the stakeholders, including preparation process. The auditors should verify the the PPI Secretariat (SPPI), National Land key elements of the feasibility study carried out by the Transport Agency (ANTT), the Planning GCAs (including demand projections), the efficiency and Logistics Agency (EPL), the Ministry of and effectiveness of project structuring, and the steps Transport, Ports and Civil Aviation (MTPA)24 in project review and approval, including the basis and the transaction advisor. The TCU analysed of decisions and intentions. The audit process shall the parameters related to the concession plan also review whether the GCA has considered different (Law 10.233/2001), the road exploration plan alternatives for implementing the project and selected and the technical, economic and environmental the most appropriate set-up through a transparent feasibility studies of the project. The draft and objective approach. Audits also potentially help in projects agreements were also analysed and identifying process gaps which, when addressed, can the compatibility of these documents with the drive efficiency. economic and financial aspects of the studies was determined. An effective audit of the project preparation process, including early stage screening and feasibility The TCU finally approved the project in May evaluation stages, can be useful in mitigating 2018 while providing guidance on specific project procurement and implementation risks and actions to be taken up by ANTT before initiating rationalising costs. For instance, the Federal Court the tender notice. Some of the key areas of of Accounts (TCU) in Brazil plays an important role in suggested improvement included the provisions streamlining the audit process, which is a time-bound, related to scope changes, obligations during pre-procurement audit process, for national priority contract extension, contractual penalties, criteria projects under the Investment Partnerships Program for undertaking technical studies, and the (PPI). preparation of a plan of action to improve project supervision. The analysis of technical, economic and environmental feasibility studies contributed AUDIT REVIEW OF PROJECTS – The Federal to the reduction of approximately R $1.5 billion Court of Accounts (TCU), Brazil (US $390 million) in terms of investments and Project preparation and approvals processes, operational costs. especially in developing countries, are prone to litigation due to multiple factors, including corrupt practices, general lack of transparency, and variation in the interpretation of laws and 24 guidelines. From January 1 2019, this ministry will be called the Ministry of Infrastructure.
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6. Project communication
6.1. OVERVIEW
Stakeholder engagement during infrastructure project Further, the complexity of stakeholder engagement preparation assumes tremendous significance and market sounding multiplies in the case of PPP given the multi-faceted nature of large complex projects, where substantial risk transfer and asset infrastructure projects and the multi-dimensional ownership are often involved. Market sounding of stakeholder interfaces they tend to cut across. the project to potential developers and investors to Stakeholder groups could have interests and concerns evaluate market interest during the project preparation that are very different from each other and, in some phase becomes particularly important in the context cases, conflicting. Mapping and addressing these of infrastructure projects to be developed using the expectations during the early stages of project PPP model. This chapter accordingly assumes a PPP preparation therefore becomes critical25. lens to ensure coverage of the wider spectrum of the aforementioned issues, although many aspects Communication during the course of infrastructure discussed here also apply to projects developed under project preparation should not be treated as a set a traditional public procurement approach. of isolated actions or as a public relations exercise. Rather, it should be recognised as a strategic activity, which factors in the importance and disposition of all This chapter addresses two salient aspects key stakeholder groups towards the project, tailors of project level communication during project timely and appropriate communication actions to preparation, as shown below: inform and engage them, and fosters a supportive environment through the course of project preparation • Stakeholder engagement (Section 6.2) and implementation. • Considerations in market sounding In the context of infrastructure project preparation, (Section 6.3) effective communication should seek to: (i) map stakeholders and their perceptions and disposition towards the project; (ii) help strengthen analysis of options and project design to meet stakeholder needs and expectations; (iii) keep stakeholders continuously engaged through the course of project preparation and implementation using relevant and appropriate communication channels; and (iv) build trust, credibility, and acceptability for the project through transparent two-way communication towards creating a conducive and cooperative environment for project development and implementation.
Effective communication helps to create feedback loops to inform the project development process, and contributes to improving project design, structuring and sequencing. Proactive engagement with stakeholders early on can help identify sources of support and opposition systematically, and facilitate better alignment of project design and configuration, thereby aiding smoother implementation.
25 For more information on the importance of stakeholder engagement to address inclusion in infrastructure projects, please refer to the Global Infrastructure Hub’s reference tool on Inclusive Infrastructure and Social Equity: Practical guidance for increasing the positive social outcomes of large infrastructure projects (available on the GI Hub website in 2019).
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6.2. STAKEHOLDER ENGAGEMENT
6.2.1. Summary authorities, politicians, religious leaders, civil society Stakeholders are persons or groups who are directly organisations and groups with special interests, the or indirectly affected by a project, as well as those who academic community, or other businesses. may have interests in a project and/or the ability to Exhibit 6.1 captures priority stakeholders viewed influence its outcome, either positively or negatively26. along an infrastructure project development cycle Stakeholders, in the context of an infrastructure and highlights some of the critical considerations project, could include locally affected communities in developing a communication plan, with respect or individuals and their formal and informal to communication focus areas and channels for representatives, national or local government engagement along the project development cycle.
Exhibit 6.1 Stakeholder engagement considerations across the project development cycle
Communication Project Development cycle Aspects Identification Preparation Bidding
Priority • Policy makers • Users • Bidders Stakeholders • Government • Advocacy groups • Project sponsor departments • Employees • Media • Users • Government • Financiers • Employees of project departments sponsor • Mass media
• Prospective bidders
Communication • Project need/benefits • Assess stakeholder • Project attractiveness Focus needs / concerns • Precedents • Sponsor credibility • Mobilise support • Government support • Process integrity • Assuage concerns • Points of support and concern • Build credibility of project and sponsor
• Key elements of the proposed PPP transaction
Tools • Interpersonal • Interpersonal • Road shows, and Channels communication communication Conferences and Events • Consultations • Consultations • Websites • Discussion papers • Peer sharing • Press briefings on • Community channels project • Internet / Website
Adapted from Effective Communication for PPP Projects. Department of Economic Affairs, Government of India. 2011. Note: (1) The Exhibit lists only stakeholders who are prioritised in a given phase, and may not be exhaustive. (2) The above framework is generic and may not apply in an identical manner in all projects.
26 As defined in “Stakeholder engagement: a Good Practice Handbook for Companies Doing Business in Emerging Markets”. IFC. 2007
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Essentially, communication during the course of Illustrative communication issues to be captured infrastructure project preparation involves a structured for select stakeholders through the CNA27 are mapping of stakeholders in terms of their preferences, summarised here: expectations and concerns, prioritising them in terms • Users and project beneficiaries: User needs of importance and influence across different stages around infrastructure projects are typically of project preparation and implementation, and centred around their (i) perceptions with respect formulating a communication plan to engage them to the GCA; (ii) prevailing levels of service; (iii) effectively. expected improvements from the project; and (iv) incremental costs of the service provided. GCAs, Guidance on stakeholder engagement is especially in EMDEs with low capacity, may often organised along the following three steps: face credibility challenges, especially if the service A. Map stakeholders, and their preferences, level baseline at the time of project preparation and assess the intensity of communication is poor. Under such circumstances, projects efforts required. structured with sharp user fee increases tend to evoke negative responses, even when service B. Categorise stakeholders by their behaviour, levels after project implementation may be vastly influence and importance and target them superior. In such cases, early stage CNA can be with directed communication messages very useful, as the messaging of benefits and those and themes. required to allay user concerns can be appropriately C. Develop and deliver an appropriate tailored. communication plan to engage • Opinion leaders: This category typically includes stakeholders effectively. civil society organisations, activists, and advocacy groups, and often serves as a mouthpiece for 6.2.2. Guidance society. Though they often form a small subset of intended end-users of the project, they can A. Map stakeholders, and their preferences, and significantly impact overall perceptions and assess the intensity of communication efforts typically focus on user rights, service delivery required. assurance and affordability. Understanding the An important first step towards effective stakeholder motivations and expectations of opinion leaders is, engagement during project preparation is to therefore, crucial. identify and map all stakeholders that influence the project or are impacted during the course of project • Project Affected Parties (PAPs): These are implementation and operations. stakeholders who could be adversely impacted by the project, such as, for example, people This may be done through a Communication Needs displaced by land acquisition requirements for Assessment (CNA) exercise. A CNA systematically the project. These categories of stakeholders captures the views of various stakeholder groups on may not have a positive disposition to start with, issues pertinent to the project, the benefits expected as they may fear a loss of assets or be unsure and possible concerns. The CNA also captures the of the level of compensation. In the early stages stakeholders’ views on the GCA and other agencies of project preparation, it is critical to identify that may be tasked with preparing and implementing such stakeholders, so that assurance relating the project. The CNA is typically done through a to redress and compensation can be built into range of qualitative and quantitative methods. communication. Employees of GCAs implementing The scope and depth of a CNA exercise is project a PPP project may worry about job security and and context specific and may need to be repeated hence may have similar concerns that need to be during subsequent phases of a project to confirm identified and assuaged. the continued validity of findings from earlier CNAs, particularly when project preparation timeframes are long and if new developments induce a change in behaviours.
27 Adapted from Effective communication for PPP projects. Department of Economic Affairs, Government of India 2011.
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• Government: Communication within government The diversity of the stakeholder mix that impacts and is equally crucial given that multiple agencies is influenced by infrastructure projects, as reflected are often involved in the preparation and above, means that an early and comprehensive CNA implementation of large infrastructure projects, is an important input for project preparation and for including the GCA, cross-sectoral PPP units, stakeholder engagement and communication during funding agencies, and other departments of the the course of project preparation and implementation. government. When projects require debate and The CNA will also help GCAs to assess the intensity of multiple levels of decision-making and approval, communication actions required. formal platforms, such as committees or The areas and intensity of communication actions taskforces, may need to be constituted. This may required during the course of project preparation be particularly required when the policy is evolving and implementation can vary significantly. For or when there is an amendment or clarification instance, a PPP project being implemented by a GCA to the existing policy (for instance, a change in with relatively weak capacity or in a sector with a legislation or an issue of government guidelines limited PPP track record will require relatively greater etc.). Communication efforts should, therefore, communicative intensity, both within the government focus on building consensus within the government and with potential bidders. A project that has high and should generate trust and confidence among social and environmental impact or an envisaged stakeholders within government. increase in user fees will also call for greater intensity • Political leaders: Political leaders should inspire of communication efforts with project users. confidence and should seek to strengthen public Communication tends to be particularly effective when goodwill potential of the project. Getting political there are efforts to map and engage stakeholders right commitment early on helps create wider appeal from the early stages of project preparation. and mobilise the support of other stakeholders. A key objective of communication should be to create enthusiasm and excitement about the project and thereby win their active support and advocacy.
EARLY STAKEHOLDER ENGAGEMENT under the MIRT Framework, the Netherlands
Active stakeholder engagement is central to the and the initiatives to meet these development MIRT framework for project development. goals. Thereby, discussion, collaboration and consensus between important stakeholders is All stages of the MIRT process encourage a set as a requirement for starting a new project collaborative approach to project preparation right concept. The exploration phase typically comprises from project initiation under the ‘exploration phase’, the following activities: evaluating the strategic by conducting multiple stakeholder consultations alignment of the proposed concept, options through political and administrative meetings, evaluation to assess the benefits and impact of to ensure the involvement of all stakeholders in each alternative on the economy, environment and providing input to the feasibility of the project and in society, and selection of the preferred alternative to reaching common solutions to address needs. undertake the detailed project study. The plan exploration phase of the MIRT framework The MIRT framework encourages an integrated follows a collaborative approach that requires approach as national and regional government project initiation to start with a series of political parties will collaborate, share visions, contribute and administrative meetings. These meetings are associated resources, and help to generate a clear aimed at discussing the development needs of an picture of the relevant issues with inputs from the area, and fixing the strategic development goals communities, NGOs and businesses. continued...
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B. Categorise stakeholders by their behaviour, EARLY STAGE STAKEHOLDER influence and importance and target them with CONSULTATIONS – Thames Tideway Tunnel directed communication messages and themes. Project, the United Kingdom Once the key stakeholders and their preferences The Thames Tideway Tunnel project is an and expectations towards a project are mapped, interceptor sewer constructed in central London it is important to categorise and prioritise them by to control 39 million tonnes of untreated their behavioural disposition towards the project and sewerage that flows in to the Thames River their influence and importance with respect to the on an annual basis. The sewer tunnel runs 25 project implementation. This is critical to gain insight kilometres long, from Acton in West London on the extent and intensity of communication needed, to Abbey Mills in East London, intercepting 34 and it calls for clarity on three aspects: combined sewer outflows (CSO). 1. What are the needs, expectations and views The Department of Environment, Food & Rural of stakeholders on the project? Affairs (DEFRA), responsible for the overall 2. How can one meaningfully segment stakeholders policy on water and sewerage in the UK, worked in the context of the project? closely with Thames Water, a private company responsible for sewerage infrastructure in 3. How should a practitioner deal with varying London, to develop a solution for the overflows. degrees of support and resistance from stakeholders and the underlying sources of such While Thames Water undertook the planning, behaviour? design and tendering of the project, it was also supported by IUK (later IPA) owing to its major While the Communication Needs Assessment (CNA) project status. The Water Services Regulatory exercise can help address the first aspect above, a Authority (Ofwat) was the independent behavioural analysis and an Importance-Influence Grid economic regulator, responsible for determining can be used to systematically analyse stakeholders the charges to be borne by the customers with respect to questions 2 and 3 respectively. of Thames Water for funding the tunnel construction.
A key aspect with respect to stakeholder involvement was extensive consultation at the early planning stages. Thames Water carried out two extensive public consultations to refine the route for the Thames Tideway Tunnel. The first round of public consultation took place between September 2010 and January 2011, and the second between November 2011 and February 2012. It also conducted a third targeted consultation on four specific sites between June 2012 and July 2012. Thames Water subsequently revised its plans and submitted its planning application for a Development Consent Order (DCO) to the Planning Inspectorate on 28 February 2013. The Strategic Business Case and Outline Business Case were submitted in September 2013 and September 2014 respectively.
The project was successfully bid out in 2016, and is privately financed by the Bazalgette consortium, supported by the UK Government’s fiscal support package, to mitigate the project risks and make the project viable for private financing.
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IMPORTANCE-INFLUENCE GRID28
The Importance-Influence Grid provides a useful • Stakeholders of low influence and high approach to practitioners to group and segment importance may not have a role in decision- stakeholders in a manner that aids communication making but may be impacted by the project. planning. Importance relates to the degree of Practitioners should ensure that their needs involvement of stakeholders in the achievement are met. of the project objectives. Influence refers to • Stakeholders of high influence and low the power that stakeholders could potentially importance need to be carefully managed. have in controlling the decision-making process Without adequate information sharing and directly or by facilitating or resisting the project’s engagement, influential stakeholders that may implementation. Positioning stakeholders on the not be positively inclined could potentially wean grid provides a guide for communication actions. Practitioners should exercise due care and validate away support from the project. their judgement with analytical rigour and inputs • Stakeholders of low influence and low from the CNA while categorising and analysing importance are unlikely to be closely involved stakeholders on this grid. Generally: with the project. However, they need to be kept • Stakeholders of high influence and high informed to avoid misperceptions. Practitioners importance should be closely involved should take care that vulnerable groups, such throughout the project cycle to promote their as low-income people and women etc., are not participation and ownership. assumed to be of low importance.
28 Adapted from Effective Communication for PPP Projects. Department of Economic Affairs, Government of India. 2011 and Strategic Communication for Privatization, Public-Private Partnerships, and Private Participation in Infrastructure Projects. World Bank. 2008.
BEHAVIOURAL ANALYSIS
Behaviour analysis helps practitioners to • Encourage project advocacy by the important understand and deal with stakeholders’ overall and influential: Practitioners should get the disposition towards the project. The behaviour ‘important’ and ‘influential’ stakeholders to scale that helps position and analyse stakeholders become project ambassadors. This tends to based on the behavioural disposition to the project create a positive perception and helps mobilise is found below. wider public support.
There are four important behavioural objectives • Address underlying factors leading to that communication actions should achieve: resistance: Communication actions should address underlying sources of resistance. These • Deal proactively with extreme perceptions: factors typically include misperceptions, lack of Even a small proportion of influential trust, genuine grievances and vested interests. stakeholders, such as political leaders or advocacy groups in extreme positions, namely • Win support of the neutral and unaware ‘advocating’ or ‘opposing’ stakeholders, can skew stakeholders: Neutral and unaware overall perceptions about the project. Identifying stakeholders should be kept informed of project and engaging with such stakeholders should be developments. a foremost priority for practitioners.
Opposing Unaware Neutral Supporting Advocating
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C. Develop and deliver an appropriate communication 4. Assurance-led: This mode of communication plan to engage stakeholders effectively. becomes necessary, particularly when there has The mapping of stakeholders and their preferences, been a bad precedent (e.g. a poorly executed along with their categorisation based on their project in the recent past). Communication here behavioural disposition, importance and influence, should highlight how the project is different from should form inputs to develop and deliver a proactive the past and the safeguards that have been communication plan. Communication actions ought put in place to avoid a repeat. A strong focus to address two aspects, namely the theme or on safeguards, including stringent obligations, message, and the medium or channel. performance security requirements, and scope for higher public participation etc., also provides Choice of communication themes and messaging: assurance. A good process compliance where Communication actions should follow from the the practitioner sticks to a time-bound plan, stakeholder-wise behavioural objectives and should disseminates progress, and reports deviations be consistent with the objectives of the project in a transparent manner also provides a signal preparation. There are five possible dimensions29 of assurance to stakeholders. along which communication themes could be 5. Champion-led: An important aspect of delivered communication is to create advocates for the and these are illustrated with examples below: project beyond the GCA. Having a charismatic 1. Benefit-led: Typically here the focus of and credible ‘face’ for communication in the initial communication would cover project benefits stages helps to provide upfront credibility and and could include investment substitution a good starting point for the project, though over- (comparison vis-à-vis alternate investment reliance on champion-led communication without proposals for the same objective), lower costs, back up from other dimensions could back-fire speedy execution and improved service delivery. and is not advisable. Users typically respond Often, this will require looking beyond the obvious. well when a trusted political leader or bureaucrat For instance, user charges in public water supply champions the project, however this may be systems are often less than operating costs. affected by political transitions etc. A project structured to recover costs could lead Choice of communication medium and channels: to unacceptably high user fees vis-à-vis the existing tariffs. However, if the costs of coping Channels enable the delivery of messages and the with poor water supply, such as having to resort exchange of ideas and views amongst stakeholders. to private tanker supply, incurred by users are A multi-channel approach towards communication high, then a comparison of the ‘proposed user improves the odds of achieving the desired fee’ with the ‘coping costs’, as opposed to the behavioural change impact more efficiently and existing tariff, can potentially dampen resistance quickly. Key considerations for channel selection, to higher but legitimate user fees for improved include reach (percentage of audience that will be service delivery. exposed to the message), frequency (average number of times of exposure) and cost of communication. 2. Aspiration-led: Aspiration-led communication A variety of options can be potentially used by project can help get a range of stakeholders on board development agencies and GCAs to reach out to and involves appealing to the aspirational sense. stakeholders, including the following: Messages such as ‘world class facilities’ can provide aspirational appeal if they are truthful. 1. Interpersonal channels cover one-on-one Political leaders often respond well to aspirational interactions, group interactions, public cues. consultations, and structured deliberations through committees and task forces. Highly 3. Precedence-led: Communication indicating that interactive and consultative communication, such a similar project has been executed in the past as among government agencies, between officials brings familiarity and comfort. Demonstrating and political leaders etc., is largely through how the project features are similar to another interpersonal channels. successful project can provide a visible anchor point for stakeholders and a ‘see’ and ‘believe’ experience.
29 Adapted from Effective communication for PPP projects. Department of Economic Affairs, Government of India 2011.
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2. Community-based channels reach a community 4. Internet and social media have emerged as an or a group of people within a geographic area important channel for communication. Apart from or based on common characteristics, such as social media, websites are often an important occupation, and include community activities source of information disclosure for reporting (fairs, concerts, folk dramas, rallies, and on project progress. They also provide a cost- parades) and mobilisation (street meetings and effective mechanism to reach a wider audience. consultations). They offer scope for interactivity The interactive functionality can also support and tend to be the more preferred channels for cost-effective consultative processes and help communication for the GCA with users and the elicit stakeholder feedback among advocacy general public. groups and opinion leaders.
3. Mass media channels help in reaching large Putting together a communication plan involves audiences within a short time, and include weaving together a coherent and comprehensive set television, radio, print media and newspapers, of actions to deliver stakeholder-relevant messaging outdoor/transit advertising, and direct mail. themes through appropriate communication channels. Exhibit 6.2 provides an illustrative matrix of objectives, actions and channels for communication with different stakeholder groups.
Exhibit 6.2 Stakeholder communication actions during project preparation
Stakeholder group Communication Communication Preferred objectives actions channels
Users and Advocacy • Reinforce users on • Showcase benefits to • Community channels Groups benefits relating to users - service access, • Consultations with service quality and quality and affordability opinion leaders and affordability of service • Highlight service advocacy groups • Dispel misperceptions assurance and • Web and social media- about the project contractual safeguards based information to protect user rights • Receive feedback to dissemination and further strengthen the • Use audio-visual consultations project design and examples of other safeguards successful projects
Employees of Project • Provide assurance to • Showcase benefits to • Open consultations and Sponsors and Labour employees employees, namely skill hearings Unions building, better working • Disseminate • Consultations (with conditions information on the labour unions) project • Disseminate • Employee newsletters alternatives and • Encourage participation for information redress in case of and involvement dissemination genuine grievances • Peer experience • Initiate ongoing sharing with labour dialogue with unions unions
• Champion-led communication
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Exhibit 6.2 (continued) Stakeholder communication actions during project preparation
Stakeholder group Communication Communication Preferred objectives actions channels
Political • Provide assurance of • Showcase benefits to • Interpersonal Leaders public benefits and the public and assure communication support them of the political • Orientation visits to support to the project • Gain commitment and project sites advocacy • Establish precedence • Interaction with project of successful PPP • Showcase aspirational users projects and alignment aspects with policy goals • Interaction with agencies experienced • Facilitate experience in similar projects sharing and peer influence to reinforce the above
Government • Gain commitment • Articulate tangible • Interpersonal Officials benefits to government communication • Validate conformance with policy objectives • Highlight alignment • Formal consultation with policy objectives forums (steering group, • Facilitate faster and safeguards in case committees) decision-making and of negative precedence approvals • Orientation visits to • Facilitate experience project sites • Showcase aspirational sharing and peer aspects • Interaction with project influence to reinforce users above • Peer experience sharing
Private • Communicate project • Engage early to • Roadshows as required Sector terms and PPP build confidence, • Social media structure generate interest and engagement and web- participation • Build interest based
• Pre-bidding conferences
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PROJECT STAKEHOLDER CONSULTATIONS: Within government and with the public – Regional Rail Link, State of Victoria, Australia
The Government of Victoria’s Regional Rail Link • the Department of Treasury and Finance (DTF) (RRL) project was a large-scale revival project to within the Government of Victoria, which remove bottlenecks in Melbourne’s rail network provided financial oversight and project scrutiny and expand the regional rail network. The RRL was through its gateway review process and High delivered through six works packages, consisting Value High Risk (HVHR) Framework; of three alliances with a total of 16 organisations • Public Transport Victoria (PTV), which was the engaged directly. key coordinator and planner for public transport Jointly funded by the Australian Commonwealth at the time of the RRL; and Victorian Governments, RRL was one of • VicTrack, the owner of Victoria’s public the most significant and complex infrastructure rail assets and operator of the railway projects in Victoria, and the largest public transport telecommunications and signalling equipment; development in Australia during its construction. and Developing and implementing the RRL project involved extensive inter-departmental coordination • V/Line, the operator of the rail services on the among the following agencies: RRL.
• the Government of Australia, which provided The project also focused strongly in managing partial funding for the project through the public perceptions and expectations of service Building Australia Fund; delivery, right from the planning stages. Proactive stakeholder engagement helped ensure that all • the Department of Economic Development, parties were kept informed of project progress and Jobs, Transport and Resources (DEDJTR) any issues were promptly addressed. From July within the Government of Victoria, which is to September 2008, the government sought wide the successor to the former Department of ranging inputs through a stakeholder consultation Transport (DOT) and the former Regional Rail process, which resulted in over 2000 comments Link Authority (RRLA), which led the planning that helped project implementation, and the long- and delivery of the RRL project; term strategic direction for Victoria’s transport • the Department of Premier and Cabinet within infrastructure. the Government of Victoria, which provided a The project was delivered eight months ahead of state-wide government policy and leadership schedule and approximately AU $600 million under function for the project and liaised with the budget, and won several awards. Australian Government;
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6.3. CONSIDERATIONS IN MARKET SOUNDING
6.3.1. Summary Developing an active private sector engagement Guidance in this section focuses on market strategy to attract private operators from the early sounding imperatives during the project stages of project preparation can be crucial in development cycle, as follows: facilitating a keen contest during and prior to the A. Proactive engagement to market projects bidding phase of the project. and elicit early stage feedback is crucial.
Especially in contexts and sectors where there is B. Create dedicated capacity within inadequate precedent of PPP projects, and where the government to handle stakeholder local private ecosystem may not have been developed, management and market sounding. marketing and market testing a project to industry early in the project preparation cycle is very useful.
The primary focus of the market sounding effort should be to connect with the universe of private developers that could potentially bid for this project. A fair contest among qualified private developers is critical for achieving an efficient price and effective project implementation. Engaging the private sector through an active communication focus is thus critical.
To prepare for the market sounding activity, the GCA should: (a) identify and engage as wide a set of potential bidders as possible; and (b) identify positive aspects of the project that position the project as an attractive investment opportunity and the GCA as a credible partner that will honour its obligations under the project contract.
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6.3.2. Guidance 2. As the project structuring is being finalised, the GCA must engage with the private sector through A. Proactive engagement to market projects and a series of pre-marketing efforts. These could elicit early stage feedback is crucial. include contacting and marketing the opportunity It is not always necessary to proactively communicate to potential bidders and sharing a Preliminary with and market a project to the private sector during Information Memorandum of the project the early stages of the project preparation phase in particulars through a range of channels, including jurisdictions where there is a successful track record roadshows and presentations at conferences. of PPP projects. However, in sectors where PPPs The market participants may also utilise support are yet to be mainstreamed, interactions with the from global development agencies like the Global private sector providers during even the early project Infrastructure Hub, which provides a pipeline of preparation phase may be necessary to elicit their projects across major countries31. views on the project design and structuring options. This may require the GCAs to take steps beyond just 3. During these interactions, the GCA should identifying and compiling the possible set of bidders highlight the facets of the project that make it and may require an initial round of bidder engagement an attractive investment opportunity, including through roadshows on the project concept and a stable policy environment, where this exists, consultations with the private sector, to factor in any and examples of such successful projects potential and genuine concerns they may have with implemented earlier in the local context of the respect to the project. Such consultations should be same state or sector, for example. When a project done in a transparent environment with the outcomes does not have any precedent, GCAs should of deliberations disseminated widely, preferably highlight the innovative nature of the project through the project sponsor’s website. and/or its potential for replication.
As the project reaches a fairly advanced stage of 4. An important aspect of information dissemination feasibility evaluation and the GCA is ready with is the establishment of a data room, where reasonably firm proposals on project structuring, it information related to the PPP project is made may be useful to have early stage interactions prior to available to potential bidders. The information the formal launch of the bid process. should be organised and granted equally and fairly to bidders. Early state interactions help the GCAs to market the project opportunity to a wide base of potential 5. While sharing information with bidders and bidders and also elicit useful inputs on the market’s other stakeholders, the more relevant the acceptability of proposed project terms, the structure information shared, the better. GCAs should be and risk sharing arrangements. Such interactions empathetic and see the bidders’ perspectives will help the GCAs to fine-tune their project delivery while putting together the Preliminary Information and implementation arrangements if required, to Memorandum for a project and the data room. meet market expectations wherever feasible without Such an approach sends two positive signals: negatively affecting users’ or its own interests30. (i) bidders perceive the project implementation agency to be transparent; and, more importantly Some key aspects for consideration as GCAs prepare (ii) it sends a strong signal that the project to do market testing are summarised below: implementation agency is well prepared and is 1. It is important that the universe of bidders carrying out the transaction from a position of is identified and compiled during the project strength. preparation phase itself.
30 For additional information on publishing a transparent project 31 The GI Hub Global Pipeline may be accessed at https://pipeline. pipeline, please refer to the World Bank tool A Framework for gihub.org/ Disclosure in Public-Private Partnership Projects, particularly Chapter 7 on Pre-Procurement Disclosure, available at http://pubdocs. worldbank.org/en/773541448296707678/Disclosure-in-PPPs- Framework.pdf
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MARKET SOUNDING: South Africa’s REIPPP Programme
The REIPPP Programme was a landmark initiative A key underlying factor of the program’s success by the Department of Energy (DoE) to rapidly was prioritising continuous engagement with the scale-up grid connected renewable energy private sector players and bankers, to ensure that generation through private participation. The the program design was aligned with the prevailing REIPPP Programme was implemented against the market environment. Stakeholder engagement historical backdrop of several failed initiatives to was largely driven through consultative workshops contract IPPs, owing to institutional shortcomings, organised across major project locations with capacity gaps and weak incentive structures. To active involvement of local stakeholders, including overcome these limitations and to run the REIPPP the local government. The team also conducted Programme as a sophisticated, multi-project, focused interactions with the private sector and multi-billion dollar international competitive bidding ensured periodic and transparent disclosure of process for renewable energy, the DoE co-opted project terms. This also helped to allay general and took the assistance of the National Treasury’s concerns related to the PPP model during this PPP Unit to manage the process. A small team period. The presence of an effective and credible of technical staff from the DoE and the PPP Unit project champion also played an important role established a project office, known as the DoE in streamlining the engagement process. Design IPP unit, which effectively functioned outside the factors, including the signing of PPAs early on and departmental structure and acted as a facilitator for implementation arrangements, were an outcome the REIPPP Programme. of this engagement process. One of the unique elements of the program was that the bidders were Since inception, the REIPPP Programme has expected to come with lenders already locked in, received private sector investment of US $15 billion. which helped in incorporating the lenders’ concerns Overall, 43% (i.e. 6,376 MW) of the total targeted into the program design. renewable energy capacity of 14,725 MW has been procured. 62 operational IPPs aggregating to 3,744 MW reached commercial operation by 2017 and created 38,774 job years.
B. Create dedicated capacity within government Irrespective of whether a GCA is able to partner to handle stakeholder management and market with a communication agency, it should designate sounding. a communications officer or committee in charge Traditionally, many stakeholder consultations of handling stakeholder engagement and market are managed by GCA staff taking care of the sounding aspects. In cases where a project is complex communication aspects on top of their usual duties. or large and communication involves coordination However, for complex projects, it may be useful across a number of entities within and beyond the for GCAs to have dedicated, specialist staff with a government, a communication committee may clear accountability for handling the communication be constituted. The communication officer should aspects. In some cases, market sounding is handled establish a team that is empowered to undertake by a specialised entity. For instance, the Strategic various tasks pertaining to the communication for the Investment Division of the Rwanda Development project. The communication officer should make sure Board (RDB), Rwanda’s investment promotion that all implementation activities are in line with the agency, also functions as its central PPP unit. The communication strategy, remain within budget, keep RDB’s strong investment promotion focus helps the on schedule, and ensure involvement of partners as marketability of projects supported by the PPP unit. envisaged.
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Contents of Appendices
Appendix A: Country cases 90 Appendix B: Detailed methodology for reference tool 254 Appendix C: Relevant literature 257 Appendix D: List of organisations contacted 266 Appendix E: Consultant team 271
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT IDENTIFICATION ENVIRONMENT AND CONCEPT DEFINITION
Strong project preparation enabling framework Dedicated agency to identify and support nationally at the sub-national level, ably supported by significant projects from the initiation stage, through federal institutions a well-defined framework
Australia’s project preparation landscape aligns with Infrastructure Australia evaluates projects for its devolved constitutional set-up, with sub-national suitability and relevance, to be added to the pipeline governments at the state level having established their of nationally significant projects – the Infrastructure own independent enabling frameworks to aid project Priority List (IPL). This evaluation is done through development. These institutions assist and address a defined framework, the Assessment Framework, all aspects of project preparation - setting policies which details the process and criteria against which and providing guidelines, drafting and monitoring projects are evaluated. long-term strategic plans and providing approvals, To support projects at the conceptualisation stage, quality assurance, and capacity building support to Infrastructure Australia also permits ‘initiatives’ to be contracting authorities within the state. These state added to the IPL, which are essentially priorities that level institutions are ably supported by those at the have been identified to address a nationally significant federal level: Infrastructure Australia (IA) to assist need, but require further development and rigorous in the delivery of nationally significant projects; assessment to determine and evaluate the most the Department of Infrastructure and Regional appropriate option for delivery. Development to provide policy advice and delivery support; the Department of Treasury to conduct Independent audit and long-term planning of independent reviews and appraisals of nationally country-wide infrastructure delivery landscape significant projects, and the National PPP Working Group to ensure consistency and coordination across Infrastructure Australia conducts a comprehensive jurisdictions for PPPs. audit of Australia’s infrastructure needs and delivery landscape, through the National Infrastructure Audit Encouraging national collaboration for project (NIA). The NIA is undertaken every five years and development through overarching policies and is an exhaustive document which evaluates the coordination through the National PPP Working Group existing infrastructure gap and estimates demand for infrastructure over a 15-year period. It also analyses To ensure uniformity across jurisdictions for project the sectoral investment and regulatory climate, policy delivery, Australia’s federal government has drafted considerations, and other support mechanisms national level PPP policies and guidelines, which required to realise this demand. In response to this are applicable for all PPP projects undertaken in audit, Australia prepares a 15-year rolling plan, the the country. The National PPP Working Group, an Australia Infrastructure Plan, which provides a inter-jurisdictional committee comprising long-term strategic direction not only for project representatives from the federal and all state delivery, but also for the enabling framework for governments, further promotes and advances infrastructure development. coordination efforts. Through a collaborative approach, the committee works to improve the PPP processes and their implementation in Australia.
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PROJECT APPROVALS PUBLIC MARKETING AND AND QUALITY ASSURANCE STAKEHOLDER ENGAGEMENT Adapting the UK’s Gateway Review Process to Transparent disclosure of project development, an Australian context to enhance effectiveness with real-time reporting through government and relevance managed portals
Australian state governments have adopted the United Australian governments regularly monitor and Kingdom’s Office of Government Commerce (OGC) disclose details of ongoing and proposed Gateway Review Process for quality assurance across infrastructure projects through multiple mechanisms. all jurisdictions, adding modifications to enhance the While state and national individual statutory outcome of the process and make it more relevant to authorities publish updates in their annual reviews, the Australian context. For instance, the Department the National Infrastructure Construction Schedule of Finance within the Government of Australia is an online portal which also provides information recommends a staged escalation within the review on major infrastructure projects committed to by process called ‘Enhanced Notification’, which defines governments across the country in a dynamic, escalation actions based on specific triggers in project easy-to-use manner. Finally, The Australian and assurance. Further, the Government of Victoria has New Zealand Infrastructure Pipeline, a central portal built upon the Gateway Review Process and added developed through a joint initiative between the a series of additional project assurances and checks Australian and New Zealand governments, provides for high-value or high-risk projects. a forward view of public infrastructure activity across Australia and New Zealand.
Soliciting stakeholder support when designing long-term plans for infrastructure development
Unique to Australia’s development planning framework is its extensive use of soliciting inputs from a wide range of stakeholders for its long-term strategic plans. Most of Australia’s strategic planning documents welcome submissions and suggestions from industry associations, public interest groups, local government bodies and individuals. Planning authorities then work closely with these representatives to incorporate and address their concerns, prior to finalising the planning document.
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2. Snapshot of project preparation activities
Australia’s infrastructure development environment preparation; and (iii) a state level planning agency, is amongst the most advanced and mature which sets the long-term vision and strategic priorities structures globally. It is defined predominantly by for the development of the state. state level institutional and policy frameworks that Some states have also established specialised are guided by overarching national frameworks and institutions to support project development. For guidelines to provide consistency and coherency instance, PPP projects in the state of Victoria are across all provinces. supported by the Office of Projects Victoria. The office provides guidance on technical scope, engineering INSTITUTIONAL FRAMEWORK design, project cost, and financial and contractual Infrastructure project preparation in Australia follows risks during project evaluation. In the state of New the country’s federal system with each state having South Wales, the state treasury department has set its own institutional framework to support project up its Infrastructure and Structure Finance Unit, which development. Typically, this comprises: (i) the state specialises in providing commercial and financial treasury department, to provide quality assurance, advice to the state government on infrastructure approve projects and prepare annual budgets for projects with a cost of over approximately US $70 government expenditure; (ii) a state level PPP unit million (AU $100 million). that establishes good practice guidelines for project
STATE LEVEL INSTITUTIONAL SET-UP The Partnerships Victoria team, housed within FOR PROJECT PREPARATION – THE CASE the DTF, provides a framework for developing OF VICTORIA contractual relationships through PPPs in the Infrastructure Victoria is an independent statutory state. It serves as the first point of contact for body that guides decision-making on Victoria’s PPPs in the state and plays a central role in infrastructure needs and priorities. It sets Victoria’s coordination, advisory and facilitation of the long-term infrastructure strategies and monitors procurement process for PPPs. The team also and reports on its progress. It has delivered a advises Victoria’s Treasurer, who presides over 30-year infrastructure strategy, which outlines the the State’s PPP policy and approves key PPP infrastructure challenges that need to be addressed project milestones. The Partnerships Victoria to meet the state’s long-term goals and the guiding team also serves as a conduit for communication principles by which the strategy was developed. between the private sector and government.
The Department of Treasury and Finance (DTF), The Office of Projects Victoria provides an Victoria is the relevant PPP authority as defined independent review of the engineering and in the National PPP Guidelines. DTF is not technical design for projects that undergo the responsible for direct project delivery but provides gateway review assurance process with the DTF. quality assurance for projects. DTF advises The Office of the Victorian Government Architect implementing agencies on developing project provides leadership and strategic advice to governance arrangements and also participates government on elements of urban design. at all levels of governance at all stages of the PPP lifecycle. It also sets guidelines and makes policy recommendations on infrastructure investments and PPPs in the state.
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At the national level, the state institutions are PROJECT PREPARATION LANDSCAPE supported by the apex agency for nationally Australia’s project preparation landscape is significant projects, Infrastructure Australia (IA). concentrated at the sub-national level, with state Established in 2008, Infrastructure Australia is an institutions prescribing the overarching policy independent statutory body which takes a long-term, for project preparation in the state. national approach to infrastructure planning. Project identification and concept definition. Infrastructure Australia is mandated to perform Projects are typically conceptualised and planned the following functions: by departments and agencies of the government • scope and deliver the national infrastructure (contracting authorities), based on the long-term audit every five years; development plan set by the commonwealth and state governments, such as Infrastructure Victoria’s • undertake evaluations of project proposals that 30-year infrastructure strategy for the state of Victoria. are nationally significant or where funding of more than AU $100 million is sought from the Project feasibility and structuring. Each state Commonwealth; prescribes detailed guidelines on the overall process to be followed for the preparation of their • develop a regularly updated Infrastructure PPP projects, with templates and toolkits available Priority List; and to assist project proponents through each of the • develop guidance materials for proponents stages. The project planning and preparation process to utilise in preparing initiative and project in Australia follows two broad steps. Initially, submissions. a strategic case for the project is developed and then at the second stage a full business case is Infrastructure Australia works in conjunction with prepared for the investment approval. For contracting three government bodies at the federal level – authorities who do not have the necessary funding the Department of Finance, the Department of support or in-house capabilities to conduct a full- Infrastructure, Regional Development and Cities, fledged feasibility study, the state governments also and the National PPP Working Group. provide external support. For example, Victoria’s The Department of Finance provides approvals Department of Treasury and Finance provides project for projects which are classified as nationally development support for high-risk projects, as well significant or where Commonwealth funding as those projects that have passed the strategic of more than AU $100 million is provided. It also assessment stage but need additional funding provides guidelines for the preparation of business for developing the full business case. cases for infrastructure projects. Project approvals and quality assurance. All public The Department of Infrastructure, Regional spending proposals must be approved by the Development and Cities is tasked with designing respective state’s treasury department. In some and implementing infrastructure programs in states, a separate committee to review public Australia, as well as developing policies and expenditure proposals has been set up within the state regulations to support their development. government. Typically, all projects undergo a gateway review process established at the state level, based The National PPP Working Group comprises on the UK’s Gateway Review Process. Gateway representatives from national and state governments reviews consist of a series of structured reviews and leads the development of policy and process that examine procurements at key decision points improvements for PPPs. It is tasked with ensuring (or gates) in the project cycle and are used to improve value for money in the delivery of PPPs, improving on-time and on-budget delivery of major projects. the national PPP policy, guidelines and practices, These reviews are conducted by dedicated teams and ensuring consistency and cooperation across housed within the treasury departments of jurisdictions in the application of PPPs. state governments.
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State treasury departments have also mandated Using Infrastructure Australia’s Assessment Framework additional checks and balances for projects that have to identify and deliver national priority projects. been designated as higher risk projects. For instance, Infrastructure Australia uses an Assessment the state of Victoria’s High Value High Risk Framework Framework to evaluate projects and initiatives requires that all project proposals must complete that are nationally significant to be included in the preparation of a full business case, require treasury Infrastructure Priority List for expedited delivery. approval for funding decisions, share risk mitigation The Assessment Framework recommends a five- plans for risks identified through the gateway reviews, stage process for decision-making, starting from and update the treasury department on a quarterly project identification and prioritisation, initiative basis as part of the Major Projects Performance Report. identification and options development, business case development, business case assessment and Mapping salient features of Australia’s project post completion review. This framework serves as preparation landscape an evidence-based development guide for projects Evidence-based strategic planning and vision for that seek support from Infrastructure Australia. infrastructure development at the national and sub- Periodic auditing and review of Australia’s overall national level. Infrastructure Australia conducts infrastructure delivery landscape. In 2015, the a comprehensive national audit of Australia’s key Commonwealth Government mandated Infrastructure infrastructure and assesses future development needs Australia to prepare its first ever national audit to project demand for infrastructure over the next 15 (the National Infrastructure Audit), which is an years. On this basis, the Australian Infrastructure Plan independent assessment of Australia’s infrastructure is prepared on a rolling basis every five years, which needs. The audit will be conducted every five years, encapsulates a reform and investment roadmap to and is aimed at providing recommendations on achieve the vision. Projects and initiatives which aid governance and policy reforms required to meet the in addressing nationally significant challenges are infrastructure needs identified by the audit. One of included in the national Infrastructure Priority List (IPL) the recommendations of the audit was to draft and are given focused attention and debottlenecking a 15-year Infrastructure Plan. Released by to move forward. At the state level, long-term visions Infrastructure Australia in 2016, this is a rolling plan and strategy are prepared by state counterparts, which provides a vision and roadmap to address such as the Infrastructure New South Wale’s State existing infrastructure gaps in Australia, and lays Infrastructure Strategy for 20 years, and Infrastructure out a comprehensive package of reforms focused on Victoria’s Infrastructure Plan. These strategies and all aspects of infrastructure management – planning, plans help in shaping the project pipeline. Long-term delivery, investment and management. The plan planning for infrastructure in Australia is also done identified four high-level aspirations for Australia at a regional level. For example, the Greater Sydney – enhancing productiveness of its cities and Commission released the Greater Sydney Region Plan regions, ensuring infrastructure markets are robust, in 2018, setting out a 2056 vision for a metropolis efficient and well-regulated, developing sustainable of three cities. Plan Melbourne 2017 – 2050 sets infrastructure, and establishing a culture of robust a long-term plan to make Melbourne ‘more and transparent decision-making and delivery across sustainable, productive and livable.’ ShapingSEQ all infrastructure sectors. 2017 sets out a 25-year long-term land use plan for the South East Queensland region and in Western Australia the 2017 Perth @ 3.5 million strategy sets out a vision for 2050 based on sub-regional land use planning and infrastructure frameworks.
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Adopting UK’s OGC Gateway Review Process for quality assurance. Infrastructure nodal agencies use the CAPACITY BUILDING SUPPORT FOR UK’s Gateway Review Process for quality assurance VICTORIA’S PROJECT PREPARATION for infrastructure projects, adapted and modified to LANDSCAPE suit Australia’s institutional and strategic framework. The state of Victoria, through its apex agencies These modifications support greater due diligence for project development, has released a series on review mechanisms. For instance, Infrastructure of guidance documents covering all aspects NSW has used the gateway process to develop the of project preparation, to streamline project Investor Assurance Framework, a tiered approach development in a standardised manner. to conducting assurance based on the risk of the project. Infrastructure Victoria has provided additional Investment management standard (IMS) aids reviews for high risk projects through its High Value decision-making for project proposals at the High Risk Framework and added design review to strategic assessment case stage, based on a the gateway process through the Victorian Design four-stage workshop method. Review Panel. The Department of Finance within the The asset management accountability Government of Australia provides quality assurance framework details mandatory asset through gateway reviews, as well as Implementation management requirements for government Readiness Assessments (IRA). IRAs essentially agencies in Victoria, along with general, best provide assurance on practical delivery matters for practice guidance on asset management. the project. The investment lifecycle guidelines provide Extensive disclosure of project pipelines and status practical assistance to proposing investment updates. Adequate project disclosure is one of the projects in Victoria. cornerstones of project preparation in Australia. Information on ongoing and proposed projects Partnerships Victoria requirements build on is easily accessible and provided across multiple Australia’s national PPP guidelines to develop portals, depending on the authority responsible for best practice standards for PPPs in Victoria. the project. Infrastructure Australia publishes an The High Value High Risk (HVHR) Framework update on the IPL on an annual basis, as do state comprises a series of project assurance checks infrastructure bodies. Portals such as the National and processes for HVHR projects to increase Infrastructure Construction Schedule and the the likelihood that they will achieve their stated Australia and New Zealand Infrastructure Pipeline benefits and be delivered successfully, on time provide details on government procured projects. and to budget. Further, all business cases for appraisal by respective treasury departments are provided to the public for Technical guidelines on project governance, consultation prior to approval. Australian governments economic evaluations, project risk, also routinely published post-completion reviews sustainability, project budgeting. (PCRs) on web portals for public information. In addition, the DTF also delivers formal programs Capacity development on project preparation by on capacity building through Partnerships state institutions. Capacity development for project Victoria. These formal programs range from preparation is provided by the infrastructure bodies workshops on the gateway review process and and treasury departments of the respective state business case development, to a partnership institutions. These span the provision of guidance on with Melbourne University to offer programs the preparation of business cases, quality assurance, facilitating leadership development for PPPs. policy framework for fiscal management, and training The Government of Victoria is also establishing a support to build capacity amongst project proponents state level Major Projects Leadership Academy, and reviewers. to provide high-quality training to ensure that the leaders of complex major projects are at the forefront of current project delivery thinking and are skilled accordingly.
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3. Guidance for project preparation
Guidance ASSESSMENT FRAMEWORK
Owner Infrastructure Australia (IA)
Project Identification, feasibility and structuring development stage
Details The Assessment Framework sets out the process Infrastructure Australia uses to consider initiatives and projects for inclusion on the Infrastructure Priority List, a list of national strategic projects. The framework provides information about how initiatives and projects are assessed by Infrastructure Australia, to enable contracting authorities to develop their submissions. The framework covers five stages: problem identification and prioritisation, initiative identification and options development, business case development, business case assessment, and post completion review. For each stage, the envisaged outputs, assessment to be undertaken, templates and checklists, and detailed technical notes are provided. Link for further details: https://infrastructureaustralia.gov.au/projects/make-a-project- assessment.aspx
Guidance NATIONAL PPP GUIDELINES
Owner Department of Infrastructure and Regional Development
Project Overall PPP lifecycle development stage
Details The National PPP Guidelines provide a unified national framework on key processes and requirements for the public and private sectors to undertake PPP projects. These guidelines apply across state, territory and national (Commonwealth) PPP arrangements. The guidelines comprise six volumes: • Volume 1: Procurement Options Analysis • Volume 2 : Practitioners’ Guide • Volume 3 : Commercial Principles for Social Infrastructure • Volume 4 : Public Sector Comparator Guidance • Volume 5 : Discount Rate Methodology Guidance • Volume 6 : Jurisdictional Requirements In addition, there is a National PPP Policy Framework that details the scope and application of the guidelines across jurisdictions. Link for further details: https://infrastructure.gov.au/infrastructure/ngpd/index.aspx#anc_public- private
Guidance RISK POTENTIAL ASSESSMENT TOOL (RPAT) – RESOURCE MANAGEMENT GUIDE NO. 107
Owner Department of Finance, Australian Government
Project Feasibility development stage
Details The RPAT provides a standardised tool to evaluate project risk for public spending proposals. While it is not an exhaustive risk analysis model, it helps procuring authorities to determine a risk rating for a spending proposal, on the basis of which it is decided whether or not a proposal may be subject to an assurance review. Link for further details: https://www.finance.gov.au/assurance-reviews/risk-potential- assessment-tool/
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Guidance GUIDANCE ON ASSURANCE REVIEW PROCESS – RESOURCE MANAGEMENT GUIDE NO. 106
Owner Department of Finance, Australian Government
Project Approvals and assurance development stage
Details This guide provides a high-level overview of each assurance process for infrastructure projects in the Commonwealth. It also outlines the circumstances and criteria that trigger each assurance process, the general timing that would apply, and where to seek further detailed information and assistance. The guidance comprises the following sections: • Example list of documentation required for a review • Skills profile of an assurance reviewer • Handbook for conducting assurance reviews Link for further details: https://www.finance.gov.au/assurance-reviews/guidance-on-assurance- reviews/
Guidance NATIONAL FRAMEWORK FOR TRADITIONAL CONTRACTING
Owner Department of Finance, Australian Government
Project Overall project lifecycle development stage
Details The National Framework for Traditional Contracting provides a best practice framework and commercial principles for delivering infrastructure through public procurement. It is intended for procuring authorities for project delivery, and central government departments when designing intra-jurisdictional guidelines and policies. The Framework comprises five documents: • The Guide: Good Practice and Commercial Principles for Traditional Contracting • Guide 1: Project Definition and Tendering • Guide 2: Development of Project Budgets in Business Cases • Guide 3: Governance and contract management • Guide 4: Performance and continuous improvement Link for further details: https://infrastructure.gov.au/infrastructure/ngpd/index.aspx#anc_public- private
Guidance INVESTMENT LIFECYCLE AND HIGH VALUE HIGH RISK FRAMEWORK
Owner Department of Treasury and Finance, Government of Victoria
Project Overall project lifecycle development stage
Details The investment lifecycle and High Value High Risk Framework (lifecycle guidelines) apply to all government departments in the state of Victoria and support the development of business cases for capital investments. The lifecycle guidelines provide practical assistance to those proposing investment projects in Victoria. They help shape proposals, inform investment decisions, monitor project delivery and track the benefits that projects achieve. They aim to provide practical guidance and tools that assist in the process of planning, proposing and delivering investments, in turn, promoting the best investment outcomes for the state. Link for further details: https://www.dtf.vic.gov.au/infrastructure-investment/investment-lifecycle- and-high-value-high-risk-guidelines
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Guidance INVESTMENT MANAGEMENT STANDARD
Owner Department of Treasury and Finance, Government of Victoria
Project Overall project lifecycle development stage
Details The Investment Management Standard (IMS) Guide provides good practice to support the government to identify and select the investments that provide the most benefit to society. It is aimed at functioning as a key tool for decision-making for shaping new investment proposals, prioritising investments, developing a new policy, and monitoring and evaluating investment proposals and organisational outcomes. The Victorian State Government widely uses the IMS Guide, and it has been adopted (either wholly or in part) in many other jurisdictions, as well as by commercial, academic and not-for-profit organisations. Link for further details: https://www.dtf.vic.gov.au/infrastructure-investment/investment- management-standard
Guidance ASSET MANAGEMENT ACCOUNTABILITY FRAMEWORK
Owner Department of Treasury and Finance, Government of Victoria
Project Overall project lifecycle development stage
Details The Asset Management Accountability Framework details mandatory asset management requirements, as well as general guidance, for government agencies responsible for managing assets in the state of Victoria. It provides support and guidance on four stages of an asset lifecycle: planning, acquisition, operations and maintenance, and disposal. The framework applies to non-current (physical and intangible) assets of government departments and is mandatory for the following aspects: developing asset management strategies, governance frameworks, and performance standards and processes to regularly monitor and improve asset management. The requirements also include establishing systems for maintaining assets and processes for identifying and addressing performance failures. Link for further details: https://www.dtf.vic.gov.au/infrastructure-investment/asset-management- accountability-framework
NOTE: This section includes guidance from the national government and the state government of Victoria on a representative basis. All state governments have their own specific guidelines, and have not been included here. They can be easily accessed on the treasury department websites, linked here.
New South Wales https://www.treasury.nsw.gov.au/projects-initiatives/public-private-partnerships/policy- guidelines-and-publications
Australian Capital https://apps.treasury.act.gov.au/infrastructure-finance-and-advisory/ppp Territory
Northern Territory https://treasury.nt.gov.au/homepage
Queensland https://www.treasury.qld.gov.au/growing-queensland/project-procurement-and-advisory/ https://www.treasury.qld.gov.au/resource/project-assessment-framework/
South Australia www.treasury.sa.gov.au/economy/national-initiatives-and-reforms/3rd-level
Tasmania www.treasury.tas.gov.au
Western Australia http://www.treasury.wa.gov.au/Treasury/Public_Private_Partnerships/PublicPrivatePartnerships/ www.treasury.wa.gov.au/cms/content.aspx?id=12659
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4. Project case example: Regional Rail Link Project
PROJECT BRIEF QUICK FACTS The Government of Victoria’s Regional Rail Link (RRL) project was a large-scale revival project to remove bottlenecks in Melbourne’s rail network and expand the regional rail network. VALUE It involved the construction of 90 kilometres (IN US $ BILLION) of new rail track, including dedicated regional tracks from the suburbs of West Werribee 2.69 Junction to Deer Park and along the existing rail corridor from Sunshine to Southern Cross Station in Melbourne’s Central Business District. The project also included the construction of two new platforms at Southern Cross Station; new train stations at Wyndham Vale, Tarneit STATUS and West Footscray; the upgrade of the Sunshine, Tottenham, Footscray, and Southern Operational Cross Stations and the removal of two level crossings at Anderson Road in Sunshine. RRL was delivered through six works packages, consisting of three alliances, two design and construct (D&C) contracts and one franchisee- managed scope of works. In total, there were PROJECT OWNERSHIP 16 organisations engaged directly through these agreements. Regional Rail Link Authority Jointly funded by the Australian Commonwealth and Victorian Governments, RRL was one of the most significant and complex infrastructure projects in Victoria, and the largest public transport development in Australia during its construction. SOURCE OF PROJECT The RRL project demonstrates the superior PREPARATORY FINANCING project planning development practices in Australia – it was delivered eight months Government budgets ahead of schedule and approximately AU $600 million under budget, owing to meticulous planning, collaborative culture and persistent, ongoing communications with stakeholders. The project has also won numerous awards for implementation, including Infrastructure Project SUPPORT AGENCIES of the Year 2014 and Australian Construction Achievement Award 2015. Infrastructure Australia, Department of Treasury and Finance – Government of Victoria
* Estimated Exchange Rate: A $1 = US $0.74 (as of December 2018)
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Adequate strategic planning for major, complex 1993 – Pre-planning activities and options projects can simplify implementation. Early-08 identification for RRL The conceptualisation of the RRL project was Apr-08 Final version of the Eddington report anchored in a comprehensive plan for transport sector on Investing in Transport released, development in the state of Victoria. While the need proposing RRL as a solution for to upgrade Melbourne’s rail network was identified upgrading Melbourne’s rail network way back in 1993, the strategic rationale was built through a series of planning documents. In 2002, the Dec-08 Government of Victoria releases Victorian Government released the Melbourne 2030 the Victorian Transport Plan, strategy, which helped in identifying the key challenge identifying RRL as a key initiative for to be addressed – increasing public transport’s implementation share of motorised trips from 9% in 2002 to 20% in 2020, by developing a metropolitan train plan. This Dec-08 – Public consultations on the was followed in 2004 by the government’s Linking Aug-09 project undertaken in three Melbourne: Metropolitan Transport Plan, which further phases developed the 2002 report, diagnosing a number of rail network constraints which required attention. Early-09 Government of Victoria submits a Subsequently, the concept that evolved into the RRL proposal to Infrastructure Australia began as a recommendation in the 2008 report, (IA), to seek Commonwealth funding Investing in Transport (also known as the Eddington for RRL report), commissioned by the state government to investigate solutions for Melbourne’s rail constraints. May-09 IA completed final assessment In December 2008, in response to the Eddington of priority projects for 2009, report, the government released the Victorian Commonwealth funding for RRL Transport Plan. This was a 30-year integrated approved in the May budget transport plan that replaced Meeting Our Transport Jun-09 Special division within Department Challenges, wherein the state government committed of Transport, Government of Victoria to the RRL proposed in the Eddington report. established to oversee delivery of RRL Thus, the RRL was underpinned by a body of strong, sound policies, and a compelling need for services Aug-09 Scheduled construction established during the planning process was commencement date instrumental in procuring the long-term commitment Aug-10 Regional Rail Link Authority (RRLA), of the Victorian Government to support the project. a special purpose entity to deliver the project, incorporated 2. Effective stakeholder coordination is necessary for projects with inter-departmental involvement. July-11 Construction of major works Owing to its scope, size and complexity, developing commences and implementing the RRL project involved extensive inter-departmental coordination. Delivery of the RRL Nov-14 Construction completed project involved the following agencies:
June-15 Project opened for operations • the Government of Australia, which provided part funding for the project through the Building Australia fund;
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• the Department of Economic Development, and the community, including members of the Jobs, Transport and Resources (DEDJTR), the public, community and neighbourhood groups, local Government of Victoria, successor to the former councils, public transport operators, and investors Department of Transport (DOT) and the former and bankers. The government followed a meticulous Regional Rail Link Authority (RRLA), which led the approach to engaging with the community, through planning and delivery of the RRL project; the use of a web forum, which attracted more than 200 participants across Victoria, forums hosted by • the Department of Premier and Cabinet, the Minister for Roads and Ports, the Minister for Government of Victoria, which provided a statewide Public Transport, the Minister for Regional and Rural government policy and leadership function for the Development and Members of the Parliament, and project and liaised with the Australian Government; the Victorian Transport Summit hosted by the • the Department of Treasury and Finance (DTF), Premier of Victoria. The stakeholder consultation Government of Victoria, which provided financial process resulted in more than 2000 individual oversight and project scrutiny through its comments and pieces of feedback, which helped gateway review process and High Value High shape not only the implementation of the project, Risk (HVHR) Framework; but also the long-term strategic direction for Victoria’s transport infrastructure. • Public Transport Victoria (PTV), which was the key coordinator and planner for public transport at the 4. For complex projects, characteristics of time of the RRL; individual facets of work must be factored in, • VicTrack, the owner of Victoria’s public rail assets in the procurement plan. and operator of the railway telecommunications The use of a coordinated procurement strategy and signaling equipment; and helped deliver significant time and cost savings for • V/Line, the operator of the rail services on the RRL. the RRL project. Prior to construction, the Victorian Government developed a strategic procurement plan However, even in this complex stakeholder and to identify the preferred packaging and procurement delivery environment, the project was delivered well structure for the project. Owing to the conditions ahead of schedule and well under budget. A key driver and risk profiles of the various works packages, of the success of RRL was the highly communicative a wide range of procurement models were used. The and collaborative approach to construction adopted brownfield and greenfield sections of RRL provided by works packages, rail operators, key stakeholders a clear distinction for packaging and delivery model and RRLA. This created an environment in which all selection. The design and construct delivery model parties continually looked for opportunities to align on was considered most suitable for the greenfield works priorities, expedite the program, coordinate resources, packages and the alliance delivery model best suited share knowledge and innovations, and work together to brownfield works packages. to find balanced solutions for all. Of the six packages bid out by the RRLA, the station 3. Focus on the management of public perceptions development one was procured through the franchisee 1 and expectations for efficient delivery. works model , two packages which were greenfield in nature and involved laying of track lines and A proactive approach to community and stakeholder development of stations were procured through the engagement (including interface agreements with design and construct model2 and the remaining three, key stakeholders) helped ensure that all parties were which were brownfield packages, tending to be more kept informed of project progress and any issues risky and complicated, were procured through the were promptly addressed. Through July, August competitive alliance model3. and September of 2008, the Victorian Government sought input from a wide cross-section of industry
1 In the franchisee model, the state government signs a project agreement with a franchise operator to deliver infrastructure works on behalf of the state.
2 In the design and construct model, the state government undertakes limited design works and then invites potential suppliers to complete and construct the design.
3 In the competitive alliance model, the state government collaborates with one or more private sector parties to share risks and responsibilities during the construction phase of the project.
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT FEASIBILITY ENVIRONMENT AND STRUCTURING
Role of the Investment Partnership Program (PPI) Federal support for project preparation at the in streamlining project preparation sub-national level The PPI provides an institutional and regulatory The Ministry of Planning, Development and framework to streamline the project preparatory Management (MP), along with the Secretariat for processes for national priority projects. The program Infrastructure Development, has established a federal brings in high-level ownership, seamless coordination fund (FEP), administered by Caixa Econômica Federal and quality assurance reviews to the project (CAIXA), a Brazilian Government-owned bank, for preparatory process, ensuring time-bound preparation. supporting the structuring and development of federal and sub-national concession projects and public- private partnerships. The fund pools in budgetary and PUBLIC SECTOR CAPACITY multilateral funds to provide technical assistance to FOR PROJECT PREPARATION projects or to undertake project studies. Establishment of a specialised entity to complement public sector capacity PROJECT APPROVALS The Brazilian Planning and Logistics Company (EPL) AND QUALITY ASSURANCE has been established as a specialised technical Quality accreditation to drive project quality entity to provide guidance on long-term sectoral planning and drive efficiencies in the project planning Under the PPI program, the Government of Brazil and preparation process. EPL is also tasked with has initiated the process of quality certification developing tools to strengthen public sector capacity of infrastructure projects and studies – The and aid decision-making. Accreditation Program for the Inspection of Infrastructure Projects – in collaboration with PROJECT IDENTIFICATION the National Institute of Metrology, Quality and AND CONCEPT DEFINITION Technology (Inmetro). The project is still at its early stages but is an important step in grading project Strong framework for monitoring of the preparation practices. multi-year planning process and its integration with the budget Upfront and time-bound audit by the Federal Court of Brazil prepares a federal-level four-year plan – Plano Accounts (TCU) encourages clean and transparent Pluri Annual (PPA) - which outlines the government’s practices in project preparation processes strategic objectives, and the projects and programs Under the PPI program, a framework to to achieve said objectives. Adherence to the facilitate upfront audit of the project preparation implementation of the PPA is ensured through a monitoring and reporting framework anchored by the practices by TCU has been established. The early Ministry of Planning, Development and Management stage independent audit review of the project (MP) (The MP will be integrated with the Ministry of preparation process, documents and procurement Finance after 1 January 2019. The new ministry will be documents helps in minimising risks and called the Ministry of Economy). The legal framework expediting project implementation. (the Budget Directives Law (LDO)) aligns the PPA with the annual budget.
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2. Snapshot of project preparation activities
Brazil’s project preparation is considered in the At the federal level, the GCAs are supported in context of its recent successes in implementing project preparation by public sector institutions coordinated institutional reform actions to including the Ministry of Planning, Budget and strengthen public sector capacity in planning and Management2 (MP), the Brazilian National Bank of implementing national priority projects. Economic and Social Development (BNDES) and specific line agencies under each ministry. The MP This is specifically relevant in the context of a and the GCAs also prepare general guidelines of multi-institutional planning environment, which is the steps to be followed in project preparation. For common to other large-size developing countries. example, the MP’s manual covering pre-feasibility The Investment Partnerships Program (Programa de studies for large-scale projects (published in 2005) Parcerias de Investimentos, or PPI) of Brazil, launched provides guidance on the preparation and evaluation in 2016, helped to streamline government actions of pre-feasibility studies for line ministries and through the centralisation of strategic actions by the agencies, with the exception of the energy sector. government, optimising the governance of the project structuring process. Under PPI, Brazil established a BNDES has played a catalytic role in supporting high-profile institutional structure with clearly defined project preparation in major projects. BNDES has roles and responsibilities, which has facilitated established a separate project development division the improvement of overall project quality while with an objective to foster, structure and coordinate strengthening investor perceptions. Today, Brazil is infrastructure projects, both public concessions and one of the largest PPP markets in Latin America, with public-private partnerships (PPPs), at the federal, an investment of US $386 billion in infrastructure from state and local government level. The Federal Court 1990 to 2017. Over 94% of total PPP investment in the of Accounts (TCU) provides independent reviews of Latin America and Caribbean region during the last the project preparatory process and checks whether decade was concentrated in only five countries, with these processes are aligned with the extant rules Brazil (65%) leading the list followed by Mexico (11%). and regulations. Brazil has categorised private sector financed projects To guide the GCAs in the execution of national as follows: Conventional concessions (which do not priority projects, the government has created the receive government guarantees or direct financial Investment Partnerships Program (PPI) as a high- support, nor payments); sponsored concession level institutional and regulatory framework with PPPs (which include user charges, and payment of an objective to prioritise infrastructure projects some form of compensation from the government); and strengthen the role of the private sector in and administrative concession PPPs (which involve infrastructure projects. PPI focuses on facilitating budgetary payments by the government). collaboration between the public and private sectors in an environment of decreasing dependence on BNDES INSTITUTIONAL FRAMEWORK for infrastructure financing. Under PPI, two institutions Project preparation activities are decentralised in were created within the federal administration: the Brazil, with federal and sub-national level Government PPI Council and the PPI Secretariat (SPPI). The PPI Contracting Authorities (GCAs) undertaking the project Council is the collegiate body that evaluates and preparation for their respective jurisdictions. The line recommends to the President of the Republic the ministries may operate through specific agencies projects that integrate the PPI, deciding, also, on the for managing each sectoral aspect. For example, issues related to the execution of the contracts of 1 the Ministry of Transport, Ports and Civil Aviation partnerships. The Secretariat, linked to the Presidency (MTPA) serves as the umbrella ministry, while of the Republic, supports ministries and regulatory operational management is effected through specified agencies in planning, modelling and monitoring the agencies like the National Land Transport Regulation portfolio of projects, preserving their political and Authority (ANTT), the National Agency for Waterway regulatory competences. Transportation (ANTAQ) and the National Transport Infrastructure Department (DNIT).
1 After 1 January 2019, the ministry will be called the ministry 2 The MP will be integrated with the Ministry of Finance after of infrastructure. 1 January 2019. The new ministry will be called the Ministry of Economy.
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HOW THE PPI PROGRAM STRENGTHENED THE remaining 88 projects with an aggregate value INSTITUTIONAL AND PROCESS FRAMEWORK of US $33 billion are currently under review. On 13 September 2016, Brazil enacted Law No. The PPI program has strengthened the federal 13,334 (the PPI Law), which introduced a new governance architecture and the enabling Investment Partnership Program (Programa environment for priority projects in the de Parcerias de Investimentos, or PPI), which country. Some of the major impacts of the seeks to prioritise infrastructure projects and program include: increase and strengthen the role of the private • Seamless coordination between line agencies – sector in infrastructure projects. The PPI program The program draws in multiple stakeholders, focuses on facilitating collaboration between including line departments, project agencies, the public and private sectors in an environment financing agencies and others, into separate of decreasing dependence on BNDES for working groups, to review project proposals. infrastructure financing. Under the PPI program, The SPPI has been able to promote seamless governments and parastatals could also access coordination between managers, oversight funding for technical assistance to develop bodies, environmental agencies, parliament, concessions and PPPs. judiciary and society. This is largely due to the The idea of creating the PPI led to the clearly defined roles and responsibilities of each institutionalisation of a “one-stop shop” for the stakeholder leading to minimal conflicts. coordination of work (legal enforcement of other • Minimising project risks – The PPI process government entities involved in the delegation has led to a specific flow of decisions for the process) and communication with potential prioritisation and follow-up of infrastructure investors. This action allowed the centralisation of projects, which has helped to minimise project strategic actions by the government, optimising the risks. Additionally, the ownership of projects governance of the project structuring process. at the highest level, independent review The standard timeline of actions under the PPI arrangement and the upfront auditing has program are: ushered in a level of legal certainty, predictability • Feasibility studies – 9-12 months and transparency to the projects. This has been instrumental in improving investor participation • Public consultations – 45 days in the priority projects. • Federal Court of Accounts (TCU) analysis – • Greater citizen participation – The enabling 90 days3 legislation and institutional framework for • Bidding notice – 100 days PPI mandates that project preparation shall • Contract signature – 180 days necessarily go through a mandatory public consultation process. The consultation process As of July 2018, more than 193 projects were is designed to ensure wider outreach and that qualified in the program, of which 105 projects of citizen comments are aggregated, tabulated US $60 billion were initiated, and the and the key points incorporated, which is then communicated to the stakeholders.
While the project preparatory studies are generally Planejamento e Logística, or EPL) has been established conducted by the GCAs, in the case of specific as a specialised technical entity to support the line projects under the federal flagship programs in the departments and regulatory agencies in project transportation and logistics sectors, the Brazilian planning, preparation and appraisal. Planning and Logistics Company (Empresa de
3 Increased from 60 days in accordance with Normative Instruction nº 81 issued by the Federal Court of Accounts (TCU).
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EPL AND ITS ROLE IN STRENGTHENING external transaction advisors for undertaking the PROJECT PREPARATION project studies and ensure monitoring and quality The project preparation landscape in Brazil is review of the studies. In addition, EPL itself, with dominated by the individual line ministries and its own multidisciplinary staff, may undertake the the relevant agencies. While the national planning study (which is what it did for the fuel terminal process brings in some level of alignment in project project in the Port of Santos). The EPL is being selection, project preparation is constrained by viewed by the government and the TCU as an the absence of clear criteria for project appraisal important certifier of studies developed by and independent institutional review (technical third parties. and financial). The problem is more pronounced • Driving innovation and quality assurance – in the case of high value projects. The absence of EPL has also brought in methodological and an effective gatekeeping function for independent technological innovations to the project studies, review of project studies may lead to suboptimal including use of an updated transport matrix solutions in project identification and selection, for viability assessments. EPL has brought prioritisation, appraisal and approval. credibility to the project review process and is With an objective to address this gap in project developing an independent business case model appraisal and planning, the Government of Brazil for transport projects with technical assistance established the Brazilian Planning and Logistics from KPMG. It has also received support from Company (EPL) in 2012, a public company to the UK Government and the Infrastructure and support the line agencies in project planning and Projects Authority (IPA) in the past. Furthermore, preparation. EPL was established to streamline EPL has entered into long-term arrangements the long-term planning process for transportation with the International Finance Corporation (IFC) and logistics in Brazil with the specific objective in providing technical and financial support for to facilitate multimodal transportation. EPL also project preparation. administers studies, surveys, infrastructure • Streamlining data and information to support construction, technology development and activities aimed at technology transfer. It works in governance – EPL is developing a logistics coordination with the MTPA and the MP in policy information system, called the National Transport development and strategic planning. The key areas and Logistics Observatory (ONTL). The ONTL, of support include: apart from acting as a centralised database of transport and logistics scenarios in the country, • Preparation of the National Logistics Plan and is expected to be an important tool for planning multi-modal plans – EPL is involved in the and project preparation. preparation of a multi-year National Logistics Plan (PNL) 2025 that provides a portfolio of • Transparency in project preparation – EPL projects and recommendations on a priority list mandates that detailed project information and of actions (infrastructure, services, regulatory project documents prepared by the GCA shall and institutional) to debottleneck the sector. The be uploaded in the project portal. Further, it also PNL is prepared based on global best practices stipulates that every project should go through and simulates scenarios based on a dynamic a public hearing process and disclosures with four-step model, a tool that estimates inter-zonal respect to the changes in the project studies traffic flows considering trip generation and post public hearing. The transparency in project distribution, modal choice and flow allocation. disclosure and the superior public consultation standards prescribed by EPL provide a level of • Preparation of support studies for transportation comfort to the TCU and prospective investors. projects – EPL provides support to line The cost of project studies for EPL may be departments in undertaking technical and reimbursed by the winning bidders in the case financial studies for projects. EPL may hire of PPP projects.
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At the sub-national level, Brazil has created a Project feasibility studies and structuring. The project specialised institutional framework for managing studies are prepared by the individual line ministries PPP projects. As an example, in the State of Sao and agencies. The project studies are managed by Paulo, the PPP State Program has the Public-Private specialised agencies based on the nature of project Partnerships Management Board (PPPMB), linked procurement. For example, in the case of road to the Governor’s Office, as the highest decision- sector projects, EPL acts as a certifier and initiator making body of the state’s PPP State Program. It of project preparation for concession projects, while consists of up to eight members and the President DNIT is responsible for initial preparatory studies for and Vice-President are nominated by the Governor. It public sector projects. The project studies start with is supported by a technical committee comprised of the preparation of a concept paper for seeking in- members of the: (i) Public-Private Partnership Units principle approvals, holding stakeholder consultations, (UPPP – technical secretariat); (ii) Companhia Paulista and conducting pilot studies etc., for inclusion in de Parcerias (CPP – leads the review committee the PPA. The MP recommends that a pre-feasibility and advises on financial structuring); and (iii) the study is conducted for large-scale projects and has PPP Contracts Monitoring Committee (PPPCMC also published a guidance document on the steps for – monitors the implementation of PPP contracts). preparing a program or project pre-feasibility study. In addition, the sector bodies and General State’s Subsequent to the approval of the concept paper and Attorney (PGE) have important responsibilities in pre-feasibility study, the line departments initiate the the development of PPPs. full-scale feasibility and technical studies. Each sub- element of the project feasibility study (like technical, PROJECT PREPARATION LANDSCAPE financial, environmental etc.) is defined by specific 4 Project preparation activities are decentralised norms prescribed by the respective line departments in Brazil, with the line ministry and their agencies or agencies. For example, in the case of road transport responsible for project preparation at both the federal projects, DNIT norm EB-101 applies for technical and/or and sub-national level. A snapshot of the project economic feasibility, and IS239 and IS-201 norms preparation landscape is summarised below: for traffic studies provide guidance on feasibility studies for road projects. In the case of highway investments, Project conceptualisation and planning. The overall the norms are based on HDM-4 software5, which infrastructure planning process at the federal level covers appraisal methodologies, forecasts of is guided by: Pluri Annual Plan (PPA – a four-year network conditions and prioritisation criteria. plan), the Budget Directives Law (LDO – annual) and the Annual Budget (LOA). The PPA is prepared by the Strategic Planning and Investments (SPI) of the Ministry of Planning, Budget and Management (MP) and provides a long-term pipeline of projects. The LDO is a link between the PPA and the LOA (the final law which establishes the annual budget). The LDO is prepared by the MP and the Secretary of the Federal Budget (SFB) as part of the budgetary process. Apart from the PPA, multi-year plans are also prepared by the planning departments in each line ministry, such as the National Transport Infrastructure Department (DNIT), or by specialised planning agencies (like EPL).
4 These norms define the main points to be considered when preparing a program or project’s pre-feasibility study, to be submitted for evaluation by the Monitoring and Appraisal Commission (CMA- MF/CC).
5 HDM-4 is a software package and associated documentation which serves as the primary tool for the analysis, planning, management and appraisal of road investment decisions.
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Project preparatory financing. Brazil has a multitude of options for project preparatory financing. This TCU – ENSURING TRANSPARENCY AND includes budgetary allocations, BNDES grants, INTEGRITY IN PROJECT PREPARATION and independent facilities by multilateral entities The credibility of the project preparation (like the World Bank, IFC, and the Inter-American process is an important factor in driving Development Bank (IADB)). The government has sustainable development. Brazil, under the also established technical and financial assistance PPI program, has created independent to sub-national governments (in the structuring of time-bound processes to ensure that projects concession projects and PPPs) under the Supporting are prepared according to norms and the Fund to Partnerships Structuring (FEP). This fund technical and financial studies have been is governed by a Fund Participation Council (CFEP), prepared objectively. which includes representatives of the MP, citizen groups, and the sub-national government. The fund The TCU conducts accounting, financial, is administered by Caixa Economica Federal (CAIXA). budgetary, performance and equity audits The fund is mandated to contribute around 70 to 80% and inspections to verify the legality and of the project preparation cost, while the rest shall be legitimacy of governmental actions, as well as distributed by the sub-national government entity. It the application of subventions, subsidies and is expected that US $47 million will be contributed to exemptions. Under the PPI, the government FEP by 2019 to fund infrastructure project preparation. is targeting a 90-day6 window for the TCU approval process. Project approvals and quality assurance. The project appraisal responsibilities vary according to the nature of the project:
• In the case of projects under the PPA, the Monitoring and Appraisal Commission (CMA-MF/ CC), assisted by a Technical Chamber (CTMA), is responsible for appraising and selecting projects and defining appraisal methodologies. The MP provides overall guidance to the commission in undertaking the review process.
• In the case of projects under the PPI program, project approval is provided by a project-specific granting authority which includes GCAs, line ministries, the PPI Council and SPPI, and BNDES. The project studies shall then be approved by the TCU before bidding is initiated.
6 In accordance with Normative instruction nº 81 issued by the Federal Court of Accounts (TCU) recently.
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3. Guidance for project preparation
Guidance ACCREDITATION OF PROJECT STUDIES
Owner Secretariat PPI (SPPI)
Project Project accreditation by independent quality examiners development stage
Details The Secretariat of the Program of Investment Partnerships (SPPI), together with the National Institute of Metrology, Quality and Technology (Inmetro), has prepared The Accreditation Program for the Inspection of Infrastructure Projects. The certification program is under development and is expected to cover project feasibility studies, technical studies and execution of infrastructure projects to be evaluated by specialised entities and which will receive, based on technical requirements, a quality seal. Currently, there are already eight bodies, designated by Inmetro, able to certify projects and works, and the expectation is to increase this number in the coming months from the launch of the accreditation. Link for further details: https://www.ppi.gov.br/government-creates-quality-seal-for- infrastructure-undertakings
Guidance CENTRALISED INFORMATION REPOSITORY TO AID PLANNING
Owner Empresa de Planejamento e Logística (EPL)
Project Project accreditation by independent quality examiners development stage
Details The National Transport and Logistics Observatory (ONTL) is developed by EPL as a centralised repository of information on logistics and transportation which will serve as a planning and decision-making tool for the line departments and agencies. The ONTL also develops studies with statistical bases, maintaining a set of periodical publications, such as logistics bulletins, logistic diagnosis and geographic data of the transport sector. EPL also provides a transport cost simulator, which provides updated transport costs for the different modes (road, rail and waterways) and commodity groups (agricultural solid bulk, non-agricultural solid bulk, liquid bulk, general loads and general container loads). Link for further details: https://www.ontl.epl.gov.br/
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Guidance INTEGRATED ENVIRONMENTAL MANAGEMENT SYSTEM
Owner National Agency for Water Transportation (ANTAQ)
Project Project accreditation by independent quality examiners development stage
Details The Environmental Performance Index (IDA) is an instrument for monitoring and controlling environmental management in port facilities. The IDA allows for quantifying and simplifying information to facilitate a better understanding of port environmental issues for the public and decision-makers. Given the diversity of indicators and the complexity of environmental issues in the port sector, the IDA is built using a multicriteria analysis methodology, considered the most appropriate to address and assess problems of environmental performance. The methodology applied is the Hierarchical Analysis Process (AHP). The indicators that make up the IDA are chosen based on specialised technical literature, applicable environmental legislation and good practices observed in the global port sector. The IDA reviews projects across 38 indicators, which are then classified and weighted according to the degree of importance of each one. The following link provides the classification and distribution of indicator weights. Link for further details: http://portal.antaq.gov.br/index.php/meio-ambiente/indice-de- desempenho-ambiental/estrutura-e-indicadores/
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4. Project case example: South Integration Highway Project
PROJECT BRIEF QUICK FACTS The South Integration Highway project is a landmark highway concession project planned under the PPI framework.
The project ownership was with the respective VALUE line agency, the National Land Transport Agency (IN US $ BILLION) (ANTT). The project planning and preparatory studies were led by Empresa de Planejamento e 2* Logística (EPL) and supported by the Ministry of Transport, Ports and Civil Aviation (MTPA) and the PPI Secretariat (SPPI). The project provides major connectivity among urban centres with an aggregate length of 467.62 km. The project comprises of the BR-101, BR-290, BR-386 and STATUS BR-448 highways, which connect the most important economic points of the State of Under construction Rio Grande do Sul. The existing road network infrastructure is insufficient to meet current demand and, consequently, imposes barriers to the development of the region.
The project studies were procured through the Expressions of Interest Procedure (PMI) and PROJECT OWNERSHIP covered detailed traffic studies, engineering studies, detailing of the operational model, and ANTT economic and financial studies. The annual maximum daily volume (VDMA) is forecast as 17,561 vehicles in the third year and 35,323 vehicles in year 30. The concession period is 30 years and the concessionaire will be responsible for developing the infrastructure and providing SOURCE OF PROJECT recovery, operations, maintenance, monitoring, PREPARATORY FINANCING expansion of capacity and maintenance of the network service level. PMI (financed by The concession auction was held on 1 winning bidder) November 2018 by the federal government, through ANTT, which led to the shortlisting of the successful concessionaire through the competitive bid process.
SUPPORT AGENCIES MTPA, SPPI, EPL, TCU
*Estimated exchange rate BRL/US $ =0.26 as of 7 December 2018
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Multi-institutional coordination and independent Jun-15 MTPA calls for the preparation of technical review studies through PMI The project preparation process in Brazil is dominated Jul-15 Selection Committee (EPL, ANTT and by the line departments and agencies and was MTPA) to review the project preparation constrained by the absence of a clear criteria for project appraisal and independent institutional review Dec-16 Selection of studies presented by (technical and financial). Realising the importance Triunfo Participações e Investimentos of an independent review arrangement for major (TPI)* and approval by the Ministry of projects, the Government of Brazil established clear Transport processes for strengthening project review under the PPI framework, and also through EPL, to assist the 2017 Further detailed review by the technical line departments and agencies with an independent unit (ANTT, MTPA, EPL and PPI) assessment of the projects.
Jan to Public hearing The South Integration Highway project was identified May-17 as a national priority project under the Government of Brazil’s PPI program. The PPI program has been Aug-17 Submission to TCU for approval designed adopting best practices in project preparation. The project review drew upon multiple institutional May-18 Final approval by TCU stakeholders across multiple stages (prior to TCU review); reviews were completed by EPL (independent Jul-18 Notice for auction review), and by the Permanent Commission of Road Nov-18 Concession auction Concessions – CPOR (ANTT, MTPA, EPL and SPPI). Based on TCU’s project review documents, the multi- Jan-19 Scheduled signing of the stage review process by the institutions led to project concession agreement quality improvements and savings of around US $1 billion in the total capex budget.
2. Independent and time-bound audit of processes leading to transparency in project preparation Project preparation and approvals processes, especially in developing countries, are prone to litigation due to multiple factors including corrupt practices, general lack of transparency, or variation in the interpretation of the laws and guidelines. This has been one of the major reasons for delay in project implementation in these countries. Under the PPI program, the Government of Brazil has created an institutional mechanism to ensure time-bound audit review of each project prior to project bidding.
In the case of the South Integration Highway project, the project studies were submitted for review by TCU on 31 July 2017. TCU undertook a detailed assessment of the processes, followed by nine months of deliberation with the stakeholders, including SPPI, ANTT, EPL, MTPA and the transaction
* Operator of infrastructure facilities through concessions.
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advisor. TCU analysed the parameters related to the 4. Project studies strengthened by project ownership concession plan (Law 10.233 / 2001), the concession at the highest level contract, the road exploration plan and the technical, The Manifestation of Interest Procedure (PMI) is economic and environmental feasibility studies wherein the public sector is allowed to receive and of the project. The draft project agreements were validate project development studies prepared by also analysed, as well as the compatibility of these the private sector. The PMI procedure is adopted documents with the economic and financial aspects predominantly in cases of gaps in technical or of the studies. financial resources for procuring consultants. Under TCU finally approved the project in May 2018 while this approach, the public sector will release an providing guidance on specific actions to be taken up expression of interest (the PMI) for private sector by ANTT before initiating the tender notice. Some of participants to prepare the feasibility studies for a the key areas of improvement suggested include the given project and deliver them to the public sector provisions related to the inclusion of additional scope, for consideration. The biggest risk with respect to obligations during contract extension, contractual the PMI procedure is regarding the reimbursement penalties, criteria for undertaking technical studies, of costs. The guiding principle in Brazil is that if there and the preparation of a plan of action to improve is reimbursement required, it will come from the project supervision. The analysis of technical, winning bidder. However, the country’s track record in economic and environmental feasibility studies converting PMI studies to projects is low. Specifically, contributed to the reduction of approximately regarding PPPs, from 163 PMIs initiated between R $1.5 billion (US $390 million)7 in terms of 2010 and 2014, only 14% were successfully tendered. investments and operational costs. The preparatory studies for the South Integration Highway project were procured through the PMI 3. Extensive public consultations during the procedure, pursuant to the Public Call Notice in June preparation process 2015. The studies presented by Triunfo Participações Under the PPI program, extensive public hearing e Investimentos (TPI), the current shareholder of must be undertaken and comments from the public the BR-290 / RS concession, were taken up for must be incorporated before project finalisation. The review by EPL and the SPPI, and approved by MTPA consultation is a very important phase of the project on December 2016. The technical capacity of the preparation process and has brought transparency agencies (especially EPL and SPPI) and the project and quality improvement to the studies. The PPI ownership at the highest level have been critical program mandates at least 45 days of consultations, factors of comfort for the transaction advisor. which should cover a wide cross section of the The cost of reimbursement for the feasibility studies project-affected population. The public consultations (approximately US$ 2 million) shall be paid by the shall be driven by the individual line ministries and winning bidder. agencies with SPPI providing overall guidance and coordination.
The public hearing phase in the South Integration Highway project was between January 2017 and May 2017. It involved more than 90 days of intense participation by the general public and the state government, who received over 600 suggestions and contributions to the bidding and concession agreement, the Highway Exploration Program and feasibility studies.
7 Exchange rate: BRL/US $ =0.26 as of 7 December 2018
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1. Noteworthy practices for project preparation
EXISTING ENABLING environmental impact assessments and undertaking ENVIRONMENT training initiatives to help agencies understand the legal requirements and processes to conduct environmental Decentralised planning process with strong collaboration assessments. between provincial levels and the national government
Canada’s project preparation landscape is driven PROJECT IDENTIFICATION by collaboration between the federal and provincial AND CONCEPT DEFINITION governments. Both levels of government work closely to identify and plan Canada’s infrastructure development Integrated planning for infrastructure development, needs, as well as to prepare overarching policies and supported by legal mandates and project guidelines for project development. identification guidelines An outcome of this approach is the federal government’s Central to Canada’s infrastructure development landscape is the focus on preparing multi-year pipelines long-term infrastructure planning document, the with a long-term strategic vision for infrastructure Investing in Canada Plan, which is being implemented development. These pipelines are prepared by the through Integrated Bilateral Agreements (IBAs) executed federal, provincial and territorial governments, and between the federal and provincial governments. are typically steered by specialised agencies, such as Through these agreements, provinces identify projects Infrastructure Canada at the federal level. The planning that are in alignment with program outcomes identified activities are further supported by a strong legislative for each funding priority in the Investing in Canada Plan. framework, which makes the drafting of long-term plans IBAs are monitored by Oversight Committees established mandatory for government agencies. Case in point, between Infrastructure Canada, the federal department Ontario’s Infrastructure for Jobs and Prosperity Act for public infrastructure, and representatives from both 2015 requires the Government of Ontario to prepare the federal and provincial or territorial governments. infrastructure development plans at least every five years, with the planning horizon spanning at least 10 Specialised agencies to assist in project planning and years. Further, the act also provides the initial criteria to lead procurement for major projects identify projects to be included in the plan. • In Canada’s institutional set-up, provinces and territories are responsible for leading project PROJECT APPROVALS development. Some of these provinces have AND QUALITY ASSURANCE set up apex agencies, which provide specialised capabilities to plan and procure projects, bringing Adopting a risk-based, dynamic framework for project in vast experience of managing multiple complex approvals and monitoring projects. To further streamline project development, these agencies have also developed standardised Infrastructure projects typically require approvals of the documents and tools for use by project proponents. respective Treasury Boards in the jurisdiction, at the Today, these agencies are focused on complex pre-feasibility as well as the feasibility stage. However, infrastructure delivery and support to municipalities the criteria for projects which require approvals varies to build capacity to develop a program across implementing agencies or ministries and is of viable PPPs. communicated on an annual basis by the Treasury Board. The criteria are defined factoring in two Distinct institution to oversee environmental aspects - the project risk (through aspects such as assessments, functioning as a centre of expertise cost and complexity), as well as the agency’s history The federal government’s Canada Environmental in undertaking and managing projects. By factoring in Assessment Agency supports project development by the agency’s performance in previous years, approvals conducting environmental assessments for projects processes are made more efficient, allowing for Treasury that require federal support. It functions as a centre of Board oversight where it is required most. expertise for environmental assessments, providing project proponents with tools to aid in conducting
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2. Snapshot of project preparation activities
Canada’s project preparation landscape has emerged as one of the best globally, for its consistency, STATE LEVEL APEX AGENCIES FOR PROJECT comprehensiveness and ability to prepare projects PREPARATION that are bankable. While the federal government Partnerships British Columbia provides advisory provides institutions to support project preparation, support to government agencies on planning, it is the provincial governments who drive procuring, and delivering infrastructure projects, infrastructure creation and PPP project pipeline along with leading procurement processes development in the country, along with setting for complex infrastructure projects in British the overarching policies and regulations within Columbia. It also undertakes capacity building the province. initiatives on business case development and project procurement, under its Stakeholder INSTITUTIONAL FRAMEWORK Engagement Plan. Since its inception in 2002, In Canada’s decentralised federalist system, the sub- Partnerships British Columbia has participated national governments have jurisdictional responsibility in 52 projects with a cumulative capital for planning and providing infrastructure in key sectors investment of approximately US $13.4 billion.1 such as transportation, housing, water and waste, Infrastructure Ontario (IO) is a crown agency and energy services. Typically, project planning and established through the enactment of the preparation is led by the respective provincial line Ontario Infrastructure and Lands Corporation ministries and local government bodies, who are Act 2011. It functions primarily as an responsible for project identification, development implementing agency for infrastructure and implementation. The fiscal impact of undertaking development in the province of Ontario, capital infrastructure projects is managed by the serving as an interface between the public Treasury Board’s Secretariat of each province, who and private sectors. It delivers results through provide key approvals for project implementation. four business divisions: A number of provinces in Canada have also • Through its Major Projects division, IO established their own apex agencies for project manages the procurement for all major development; these include Alberta’s Advisory infrastructure projects in the province. Committee on Alternative Capital Financing, Through the Alternative Financing and Partnerships British Columbia, Infrastructure Ontario, Procurement (AFP) approach, Infrastructure and Saskatchewan’s SaskBuilds. These apex agencies Ontario focuses on PPPs which are paid for by often function as centres of expertise for procuring the public sector, rather than through charges major capital projects. Through these agencies, levied on users. To assist the procurement the provincial governments manage the creation of a pipeline of feasible projects, use standardised of AFP projects, IO helps project owners project preparation processes and foster collaboration with project structuring, design and output with the federal, as well as municipal governments. specifications, implementing the complete procurement process and overseeing the construction of the project.
• The Real Estate Services team is responsible for asset planning, facilities contract management and real estate advisory services. continued...
1 Exchange Rate: CA $ 1 = US $ 0.75 (as of December 2018)
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The provincial institutions are, in turn, further • The Infrastructure Lending arm provides long- supported by national agencies, who play a central term loans for infrastructure development. role in policy development and provide strategic inputs to define the project preparation landscape for all • The Commercial Projects division draws on states. These institutions include: IO’s in-house expertise and provides support to the government on large commercial Treasury Board Secretariat (TBS), transactions. Government of Canada Alberta’s Advisory Committee on Alternative The TBS in the Government of Canada sets the overall Capital Financing advises the Ministry of policy on fiscal and expenditure management for Treasury Board on alternative capital financing the nation. It reviews spending proposals by federal options, and the feasibility and desirability of authorities, to assess strategic relevance, value for proposed PPP projects. The Government of money and compliance with existing rules and policies. Alberta has also established an independent The TBS is also responsible for monitoring government committee, the Government of Alberta P3 programs and projects for effectiveness and Committee, to provide recommendations and efficiencies, providing information to the parliament guidance on all aspects relating to PPPs, on a periodic basis through its Quarterly Reports. To including policy development, standards and streamline project development in Canada, the TBS guidelines, and project selection. has issued a series of directives and has developed SaskBuilds has been set up by the Government of tools which help departments to identify and plan Saskatchewan to provide a central focus within departmental expenditure plans, undertake project the government to coordinate infrastructure risk assessment, evaluate and measure departmental planning and delivery. SaskBuilds is responsible capacity to undertake projects, and structure and for developing an integrated infrastructure plan procure projects. for the province, providing support and guidance to the ministries for implementation of the plan Infrastructure Canada and leading the procurement of large-scale, Infrastructure Canada works closely with all levels of priority projects. the government to enable investments in social, green, public transit and other core public infrastructure in Canada. It develops policies, delivers programs and fosters knowledge sharing about public infrastructure in Canada. Infrastructure Canada is also responsible for drafting Canada’s long-term vision for infrastructure development, the Investing in Canada Plan, to achieve the identified national objectives and targets.
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Canada Infrastructure Bank (CIB) The CIB was established in 2017, after the phasing Canada Infrastructure Bank – Driving Canada’s out of the PPP Canada institution. PPP Canada had Investing in Canada Plan been established in 2008 to improve the delivery of The CIB has been established to help coordinate infrastructure projects across all provinces, and to the different levels of government (federal, develop tools to assist project preparation and support provincial and municipal), to identify a pipeline the procurement of complex projects. Having fulfilled of projects and potential investment its mandate of establishing PPPs as an effective opportunities, to provide low-cost financing for mechanism of infrastructure development, the new infrastructure projects, and to act as a Ministry of Infrastructure and Communities within the centre of expertise on infrastructure projects Government of Canada announced its dissolution involving private sector investment. in 2017. The CIB will be an important institution in CIB was established as part of the Government of establishing a prosperous and solid foundation Canada’s Investing in Canada Plan. In addition to for Canada’s new infrastructure, focusing on structuring projects, the CIB is also expected to invest projects that wouldn’t otherwise come to market, in or lend to infrastructure projects, and receive and and establishing a strong and stable pipeline. It process unsolicited proposals from the private sector. will not only complement Canada’s PPP efforts, This, therefore, goes beyond the earlier mandate of but also help to ensure better use of public PPP Canada, which had been focused on granting funding for a broader range of new projects. funds and providing PPP delivery expertise, since While the CIB has a pan-infrastructure focus, it the CIB will function as a procuring authority and an has identified green infrastructure, public transit, investor, as well as a centre of expertise for all aspects and transport and trade as focus areas for the of PPPs. near term. It has the objective of identifying The CIB has been actively engaging with project opportunities that provide the greatest economic, proponents and investors with the objective to social and environmental returns. attract private and institutional investors to new The Bank is also being established to act as a infrastructure opportunities in Canada. centre of expertise on infrastructure projects involving private sector investment and to help identify a pipeline of projects and potential investment opportunities. The CIB shall work between public sector project sponsors or procurement agencies and private sector sponsors. The projects considered (including solicited and unsolicited proposals) shall pass a public interest test to ensure that the project is aligned with the relevant governments’ priorities and policies and contributes to economic growth and sustainability. The CIB puts strong emphasis on promoting unsolicited project proposals, market development ideas and other innovative investment requests. The CIB is also working on an inventory of Canadian infrastructure project proposals – content provided by project proponents but managed by the CIB – which is expected to launch by mid-20192.
2 For more information on the Canada Infrastructure Bank, please refer to the Global Infrastructure Hub’s Guidance Note on National Infrastructure Banks and Similar Financing Facilities (available on the GI Hub website in 2019).
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Canada Environmental Assessment Agency PROJECT PREPARATION LANDSCAPE
The Canada Environmental Assessment Agency Canada’s project preparation landscape is defined functions as a centre of expertise for environmental at the sub-national level, with provincial institutions assessments within the Government of Canada. prescribing the overarching policy for project It manages the environmental assessments for preparation in the province. projects that require environmental assessment at the federal level3, as well as providing platforms and Project identification and concept definition. funding support to undertake public consultations Project identification is led by integrated planning at the on environmental assessment. Owing to Canada’s national and sub-national level. Infrastructure planning increasing focus on undertaking infrastructure and project identification in Canada is guided by long- development in a sustainable manner, the agency also term perspective plans at all tiers of the government. conducts capacity building initiatives to assist the federal At the federal level, the Investing in Canada Plan government agencies in meeting their obligations for is a 12-year planning document for infrastructure environmental assessment and management. development in the country that identifies US $135 billion of investments across five priorities – public Economic regulators governing infrastructure transit, green infrastructure, social development, in Canada trade and transportation, and rural and Canada has established independent regulators northern communities. responsible for maintaining efficiency, affordability and Central to this plan are the integrated bilateral quality in infrastructure services in the country. The agreements (IBAs) that are signed between the federal regulators have been established at both national and and provincial governments. These IBAs function provincial levels depending on the level of delegation as collaborative documents, establishing the terms of the sectors. Key regulatory agencies include: for the and conditions through which infrastructure funding energy sector, the Canadian Energy Regulator at the would be delivered to the provinces and territories national level and the provincial electricity regulators over the period. Planning for projects under IBAs like the Ontario Energy Board, the Alberta Utilities requires provinces and territories to develop and Commission etc.; for air, rail and marine transport, submit multi-year plans that identify potential projects. the Canada Transportation Agency; and for the water With emphasis on the outcomes within IBAs, and sector, provincial water regulators like Ontario Water with predictable, long-term funding, the provinces Resources Commission and inter-jurisdictional water and territories can structure their investments in a boards like the Ottawa River Regulation Planning way that achieves meaningful long-term results. In Board, Prairie Provinces Water Board etc. The response to the Investing in Canada Plan, provinces regulatory agencies play an important role in project and territories have also, in turn, identified their long- preparation in Canada, with responsibilities ranging term priorities for infrastructure development through from setting and reviewing user tariffs, ensuring exhaustive provincial plans, using, as a reference, transparency and quality standards for planning, the priorities identified in collaboration with the public engagement and safety, risk allocation between federal government. the government and the private partner, dispute resolution and managing sectoral risks. The regulators also ensure that the project preparation studies and approval are aligned with the specific act and rules governing the sector.
3 There are two types of Environmental Assessment conducted under the Canadian Environmental Assessment Act, 2012 – an environmental assessment by a responsible authority is conducted by the Canada Environmental Assessment Agency, and an environmental assessment by review panel is conducted by a panel of individuals appointed by the Minister of Environment and supported by the Agency.
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Integrating planning at the sub-national level: PREPARING PROJECT PROPOSALS: THE The case of Ontario CASE OF ALBERTA To further integrate planning, provinces Under Alberta’s PPP Framework and use the Investing in Canada Plan, as well Guidelines, all PPP projects must undergo as strategic plans made by other sub- an Initial Assessment stage, wherein the national governments. Ontario’s Long-Term implementing agency undertakes a preliminary Infrastructure Plan 2017 has been prepared study to assess the PPP suitability of a project, based on a suite of plans created by the in line with the criteria for Capital Projects provincial governments in Ontario, such defined by the Alternative Capital Financing as the Greater Golden Horseshoe (2017), Office (ACFO). Typically, the ACFO works in the Provincial Policy Statement (2014) collaboration with the implementing agency to and the Greenbelt Plan (2017), as well as undertake the initial study. other plans that are under consideration, After completion of a successful initial such as Metrolinx’s draft 2041 Regional assessment, the implementing agency must Transportation Plan. prepare an Opportunity Paper. The Opportunity Paper is an in-depth analysis of the project and includes: overview and description, strategic Legal framework to mandate infrastructure planning and alignment, business case and operational guide project identification. Canada’s legal framework impact assessment, preliminary project risk provides sound support to the overall infrastructure assessment, preliminary cost-benefit analysis planning process, by requiring all governments to and value for money assessment, and details prepare long-term strategic plans which are tabled on the preliminary project schedule and before the respective parliaments. These regulations team. Depending on the outcome of the initial are mandated by the Treasury Boards at the federal and assessment and other factors such as project provincial level. They require governments to prepare size, complexity, and timing etc., some projects plans that cover: audit of the existing infrastructure could skip the Opportunity Paper stage and facilities in the country or province, estimate of the proceed directly to the Business Case stage. demand for infrastructure over the long-term (at least 10 years), and a strategy to be adopted by the The business case is the detailed feasibility government to meet these requirements. Case in point stage, which expands on the Opportunity Paper is Ontario’s Infrastructure for Jobs and Prosperity Act and details the project risks, value for money 2015, which in addition to mandating the long-term analysis, project structure and procurement infrastructure planning in the province, also provides methodology. It serves as an information the criteria by which projects are screened and document for construction approval from the prioritised for inclusion in these plans. Treasury Board.
Project feasibility and structuring. All governments In addition to the feasibility study, provincial (federal and provincial) have drafted and mandated governments place significant importance specific requirements to undertake project feasibility on the preparation of a ‘value for money studies within their jurisdiction. Typically, Treasury report’, which evaluates the cost savings of Boards of the governments provide guidance and undertaking a project through the PPP route, tools that aid project proponents to develop project vis-à-vis traditional procurement. This value for documents for approval from the Treasury Boards. money analysis is based on the ‘whole of life cost approach’ and should incorporate all costs expected to be incurred over the entire life of the project.
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Project approvals and quality assurance. While the approval process for PPPs varies across provinces, PROJECT APPROVALS AND MONITORING: almost all provincial PPP projects require provincial THE CASE OF BRITISH COLUMBIA Treasury Board approval prior to implementation. Prior British Columbia’s Capital Asset Management to making a submission to the board, projects must Framework details the project approval be reviewed and approved by the Deputy Head of the process that must be followed for all provincial ministry responsible for the proposal. governments who are involved in the Depending on the specific limits set by the federal management of public assets. All proposed government, projects may also require approval from projects must undergo a strategic options the federal Treasury Board. These limits are typically analysis (SAO), which focuses on the services decided based on an organisation’s capability and that need to be met and the identified option prior record of undertaking projects of a similar size to achieve them. The decision to undertake and complexity. To manage the fiscal impact of an SAO rests with the implementing agency, PPPs, the federal government mandates all provincial depending on the perceived complexity and departments to prepare a Capital Plan, which is a risks of the project. For projects that require an three-year estimate of the expenditure to be incurred SAO, the Treasury Board reviews the findings by the department. This Capital Plan needs to be and provides the necessary capital approvals ratified and approved by the federal Treasury Board, to process to the full feasibility analysis at the and then presented to the parliament. business case stage. Specific projects require an additional Treasury Board approval at the Prior to the federal Treasury Board undertaking a business case stage as well. detailed review of the project proposal, all proposals are processed for a quality check, to ensure The limits for these approvals are requirements of the board have been incorporated. communicated to the ministries on an annual This quality check is performed by a senior official basis by the Treasury Board, set out in the of the Policy Center in the Treasury Board, and it ‘Letter of Expectations’, and take into account evaluates the quality of the proposal along four the size and risks of the project, as well as the metrics: authoritative review, complete and relevant agency’s delivery and management content, accurate and precise information, and track record. appropriate early engagement with the secretariat, Typically, as part of the consolidated capital as required. planning process, all implementing agencies must prepare a capital plan which identifies and estimates the capital expenditure to be incurred by the agency during the year. These capital plans are reviewed and approved by the Treasury Board, for consistency with provincial objectives and fiscal prudence.
The performance of the agencies with respect to the capital plans is closely monitored and assessed by the Treasury Board, using a risk- based approach to oversight. Degrees of rigour in approval requirements, monitoring, reporting and other checks and balances will increase in proportion to the cost, complexity and level of risk associated with capital projects or decisions.
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3. Guidance for project preparation
Guidance PROJECT COMPLEXITY AND RISK ASSESSMENT TOOL
Owner Treasury Board Secretariat, Government of Canada
Project Project approvals and processes development stage
Details The Project Complexity and Risk Assessment Tool supports implementing agencies to accurately determine the level of risk and complexity of a project, for the purposes of project approval and expenditure authority. It comprises 64 questions across six dimensions – project characteristics, strategic management risks, procurement risks, human resource risks, business risks, project management integration risks, and project requirements risks.
Link for further details: https://www.canada.ca/en/treasury-board-secretariat/services/ information-technology-project-management/project-management/project-complexity-risk- assessment-tool.html
Guidance ORGANIZATIONAL PROJECT MANAGEMENT CAPACITY ASSESSMENT TOOL
Owner Treasury Board Secretariat, Government of Canada
Project Project approvals and processes development stage
Details The Organizational Project Management Capacity Assessment Tool is a forward-looking assessment of an organisation’s capacity to manage and deliver the planned portfolio of projects identified in its departmental investment plan over a minimum five-year horizon. It rates the organisational capacity to manage projects across five scoring classifications by evaluating criteria in each of the following project knowledge areas: organisational integration, core project management, supporting project management. To reflect the relative importance of one knowledge area versus another, relative weightings have been defined for each assessment category.
Link for further details: https://www.canada.ca/en/treasury-board-secretariat/services/ information-technology-project-management/project-management/organizational-project- management-capacity-assessment-tool.html
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GUIDELINES TO IMPLEMENTING BUDGET 2011 DIRECTION ON Guidance PUBLIC-PRIVATE PARTNERSHIPS
Owner Treasury Board Secretariat, Government of Canada
Project Overall project lifecycle development stage
Details The Guidelines to Implementing Budget 2011 Direction on Public-Private Partnerships provides a policy direction for PPPs in Canada, by:
• Creating a common understanding of what is meant by P3s*1 in the federal context and providing resources for federal organisations considering P3s;
• Providing advice on screening considerations for federal organisations in line with the Budget 2011 policy direction;
• Outlining other policy considerations for P3s, including the key policy objective of ensuring value for money; and
• Outlining considerations for federal organisations in assessing value for money.
Link for further details: http://www.tbs-sct.gc.ca/pol/doc-eng.aspx?id=25576
Guidance PPP FRAMEWORK AND GUIDELINES
Owner Treasury Board, Government of Alberta
Project Overall project lifecycle development stage
Details Alberta’s Public-Private Partnership Framework and Guideline is a guide for assessing and procuring PPP projects. The Framework and Guideline outlines Alberta’s principles for PPPs and the assessment and procurement frameworks for PPP projects. It is designed to assist the Government of Alberta public servants and elected officials with assessing potential PPPs and delivering them in accordance with established practices in the province.
Link for further details: http://www.infrastructure.alberta.ca/alberta-p3-framework-and-guideline. docx
*1 The term ‘P3’ is commonly used in Canada and the United States instead of ‘public-private partnership’.
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Guidance MANAGEMENT FRAMEWORK: ASSESSMENT PROCESS
Owner Treasury Board, Government of Alberta
Project Project approvals and processes development stage
Details The Management Framework: Assessment Process document is a guide to Alberta Infrastructure and Transportation’s approach to assessing and approving public-private partnerships for capital infrastructure projects. It outlines the overall assessment and approval procedures, roles and responsibilities of various stakeholders, policy governing the document, factors or criteria to be evaluated, and disclosure guidelines.
Link for further details: http://www.infrastructure.alberta.ca/Content/doctype309/production/ait- p3-assessmentframework.pdf
Guidance CAPITAL ASSET MANAGEMENT FRAMEWORK
Owner Government of British Columbia
Project Overall project lifecycle development stage
Details The Capital Asset Management Framework describes government objectives and policies for planning and managing publicly-funded capital assets such as schools, hospitals and highways. It covers the following:
• the roles and responsibilities of various levels of government involved in capital asset management;
• minimum standards agencies for planning and managing assets;
• the province’s policy approach to oversight, including the approval and reporting requirements that may apply, based on agencies’ or projects’ risk profiles;
• capital-related budget processes; and
• standards for both alternative and traditional asset procurement.
Link for further details: https://www2.gov.bc.ca/gov/content/governments/services-for- government/internal-corporate-services/camf
Note: All provinces have their own specific guidelines, which have not all been included in this snapshot.
* Estimated Exchange Rate: CA $1 = US $ 0.75 (as of December 2018)
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4. Project case example: Abbotsford Regional Hospital and Cancer Center Project
PROJECT BRIEF QUICK FACTS The Abbotsford Regional Hospital and Cancer Center (AHCC) project was designed to upgrade the existing Matsqui-Sumas-Abbotsford (MSA) VALUE Hospital in Abbotsford. It includes a state-of- (IN US $ MILLION) the-art 300-bed facility, along with a specialised cancer treatment centre operated by the BC Cancer Agency. 266.25*
It was developed on a finance-design-build- operate-maintain model, with the public sector – the Fraser Health Authority (FHA) and the Provincial Health Services Authority (PHSA) – responsible for providing clinical services. The STATUS private partner, Access Health Abbotsford (AHA), was responsible for construction, maintenance Operational and facility management services, including housekeeping, food, laundry, and linen services.
The AHCC project was a pioneer for healthcare PPPs in British Columbia – it was the first major healthcare project to be implemented on a PROJECT OWNERSHIP PPP basis in the province. Given its successful implementation, on time and on budget, the Abbotsford Hospital and project has won numerous prestigious awards, Cancer Centre Inc. including the Project Finance North American PPP of the Year (2005), the Canadian Council for PPPs (CCPPP) 2005 National Award for Innovation and Excellence, and the CCPPP Silver Award for Infrastructure (2008). SOURCE OF PROJECT Partnerships British Columbia worked closely PREPARATORY FINANCING with the project proponents and the private partner to manage project procurement Government budgets and delivery.
SUPPORT AGENCIES Partnerships British Columbia
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Clarity on the project need and focus on 1990 – Pre-planning activities for the expected outcomes helps to strengthen 2001 the projects project proposals. The origin of the AHCC project was the outcome of 2001 Preparation and approval of the intensive pre-planning exercises conducted between business case as a traditional 1990 and 2001, focused on identifying the outcomes procurement project to be expected from the project. The brief of the project, as identified in FHA’s Strategic Plan was Early Evaluation for PPP suitability, revision precise – to deliver a publicly owned, high quality 2002 of business case and cost estimates and well-maintained hospital and cancer centre. The business case of the project involved identifying Nov-02 Approval of Finance-Build-Operate- specific outputs, thereby providing a strategic Maintain model for the project vision to the project, with at least 80% of the output specifications clearly defined at the planning stage Jan-03 Procurement process itself. These outputs later helped define the monitoring – 2004 and success criteria for the project, as well as the metrics for the performance-based incentive payment 2004 Commencement of construction system for AHA. The output specifications were designed in close consultation with the Aug-08 Facility open to operations health authority representatives, and included clinical and non-clinical outcomes, design and technical specifications and requirements for facilities management.
2. Using a unique and bespoke governance structure to monitor project development and construction. A governance and management structure was put in place to guide project development, procurement and construction, which was subsequently streamlined as project development progressed. The governance structure involved the following entities:
• Ministry of Health Services (MHS), which approved the project scope and budget.
• Ministry of Finance, which approved funding for the project.
• The Project Advisory Committee, comprising members from MHS, FHA, and PHSA. The committee had a significant role in shaping project planning, ensuring that all clinical and service needs identified at the beginning were taken into account. The committee was disbanded at financial close of the project.
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• The Hospital Construction Committee, established Further, the entire project development process in 2003, comprised of members of local legislative involved a collaborative approach between the assemblies (MLAs) and representatives from the ministry, health authorities and private sector Regional Hospital District (RHD). The committee partners. Feedback from the investors was sought served as an important channel of communication at an early stage during the project development and with the community, relaying information and on a continuous basis thereafter, up to procurement. seeking feedback on matters impacting the Subsequently, the project documents developed general public. as a result of this project actually served as model documents for other PPPs in British Columbia. • The Partnerships BC Project Team, to manage the procurement process and assist in post- 4. A specialised and expert agency to manage implementation monitoring. Key members of procurement in a transparent, competitive manner. the team were seconded to Partnerships BC Partnerships British Columbia managed the entire from FHA, bringing in knowledge of previous procurement process, leveraging on its experience planning processes and health authority facility and expertise of procuring complex capital projects. requirements. Going forward, the project team It was involved in the development and will also work closely with the MHS and health implementation of a new and unique four-stage authorities to undertake high-level oversight of the procurement process, which was also reviewed and project, conducting periodic reviews at five-year tailored to factor in market feedback. For instance, intervals to establish whether the agreement is Partnerships BC made a concurrent release of the functioning as envisaged and the expected benefits request for proposal (RFP), as well as a draft form have been realised. of the project agreement to identify and resolve potential deal breakers early during the procurement 3. Incorporating global best practices and process. Further, it also ran multiple bilateral and stakeholder feedback to build capacity for information sharing platforms, to assist the private project development. sector in preparing their proposals. Given the limited experience of successfully completing large healthcare projects in British Partnerships BC also engaged directly with the Columbia, the AHCC project widely incorporated MHS and the health authorities (FHA and PHSA) learnings from the UK’s Private Finance Initiative in structuring the project and defining procurement (PFI) model for healthcare PPPs, which had seen objectives. To standardise project documents, success in encouraging private investment in the Partnerships BC collaborated with a wide array UK’s healthcare market. The output-based contract of national and international advisors, including form with a performance-based payment mechanism Partnerships UK, legal firms from the UK and was adopted for AHCC’s contract. In the PFI model, Australia, and global consulting organisations to the private party also owns the facility for the entire provide advice on the RFP and project agreement. concession period. However, to protect public interest, Partnerships BC modified this structure, instead using a licensing mechanism that kept the ownership with the public sector, with the license giving the private partner specific rights under the contract.
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1. Noteworthy practices for project preparation
PUBLIC SECTOR CAPACITY Centralised publication of social prices to FOR PROJECT PREPARATION enhance project preparation and appraisal
Capacity building initiatives to strengthen social The Ministry of Social Development annually project evaluation skills of public officials determines the social prices of labour supply, the The Ministry of Social Development (MSD), which currency and discount rates, and other inputs used is responsible for appraising the projects and in appraisal methodologies, such as cost-benefit ensuring quality in project preparation, also offers analysis (CBA) and cost efficiency approach (CEA). various courses for public officials in social project The availability of input costs to the project planners evaluation. In order to build the technical capacity helps to provide a level of standardisation in project of public officials at all levels of government, MSD estimates and fiscal implications. has been undertaking capacity building initiatives in social project preparation and the evaluation of public PROJECT MARKETING AND employees through the following courses: i) training STAKEHOLDER ENGAGEMENT on the Integrated Project Bank (BIP) database; ii) Centralised online system for project information a course on the Preparation and Social Evaluation to ensure transparency in communicating of Projects; iii) a course on the Logical Framework with stakeholders Applied to the Formulation of Investment Initiatives; iv) an advanced course on Project Preparation and The Integrated Project Bank (BIP) is an online Evaluation; and v) a Diploma in Project Preparation information platform to enhance project disclosure. and Evaluation. The files in the BIP contain information on the projects, which can be updated by the project PROJECT APPROVALS promoter. Additionally, information on the project AND QUALITY ASSURANCE appraisal undertaken by the Ministry of Social Modern appraisal system for public projects Development is updated online. This system ensures with standard appraisal methodologies transparent communication between the Ministry of Social Development and the project promoter. It also Chile’s National Public System of Investments (SNI), acts as a central repository for a historical analysis of an advanced appraisal system, is a pioneer initiative the costs and demands of various types of projects, in strengthening and standardising project approvals. thereby providing better estimates of these variables The system is jointly administered by the Ministry of for future evaluations. Social Development and the Ministry of Finance. The SNI applies standard methodologies, including inputs published by the Ministry of Social Development, for project review to enable selection of the project with the largest social net present value. The SNI has also developed standard procedures and guidelines for project appraisal. This aids with the standardisation of project presentation formats and the comparison between projects under similar categories. It also allows projects to be evaluated using techniques which are widely validated and accepted by professional economists.
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2. Snapshot of project preparation activities
Chile is a Latin American pioneer in promoting best INSTITUTIONAL FRAMEWORK practices in project preparation. It was one of the Chile has established an effective institutional early countries to pass a law on concessions, to structure with a separate role for the public agencies introduce the Least Present Value of the Revenues promoting the project and for institutions in charge (LPVR) as a bid variable, and to establish a of project review and independent appraisal. Project comprehensive public investment management preparation activities are decentralised in Chile, with system. Chile’s toll road projects (starting in the the line agencies and publicly owned companies early 1990s) are considered to be one of the earliest (referred to as Government Contracting Authorities successful programs implemented using the (GCAs)) responsible for project preparation at both PPP model. the federal and sub-national levels. The GCAs in In July 2014, Chile launched the Infrastructure, Chile are responsible for planning, implementing and Development and Inclusion Agenda – Chile 30-30, a supervising projects and are supported by other public national development strategy to raise the average institutions, including the Ministry of Public Works per capita income in Chile to US $30,000 by 2030 (MOP), the Coordination of Public Works Concessions and increase investments in public infrastructure (the PPP Unit within MOP), the Ministry of Social from 2.5% to 3.5% of gross domestic product (GDP). Development (which undertakes project appraisal Under the plan, Chile envisaged to invest US $28 from a social point-of-view), the Ministry of Finance billion in public and private infrastructure projects (the gatekeeper of public finances which reviews over the period 2014–2021. The plan involves two projects from a government liability perspective) and main investment streams; an estimated US $10 billion the national congress (which has the final approval for in new concession projects until 2020, and US $18 the federal expenditure budget). billion in a range of public infrastructure projects and The Ministry of Public Works (MOP) is the implementing programs until 2021. authority for infrastructure projects and its experience One of the unique elements of the project preparation and capabilities in preparing and executing projects environment in Chile is the much acclaimed National has been instrumental in delivering high-quality Investment System (SNI), which provides a rigorous infrastructure in Chile. The ministry is responsible for framework and standardised methodology for project roads, highways, bridges, tunnels, airports, and water evaluation for public investments. Chile’s project resources. The ministry is supported by a special unit preparation environment has evolved, learning from called the Coordination of Public Works Concessions the challenges of the past. For example, with an (CC), created to streamline project preparation and objective to manage PPP investments in line with implementation for concession projects and staffed the government’s fiscal priorities, it has strengthened with specialised legal, environmental and engineering the cost-benefit analysis (in the design stage of PPP experts. It is responsible for producing detailed design proposals), established a National Infrastructure and engineering studies during the tendering and Fund (with a pool of US $9 billion and expected to supervision of public works concessions, and for operationalise in the coming years) and introduced managing the bid process. institutional reform (a Ministry of Finance officer with veto power was permanently assigned to the Ministry of Public Works to further ensure the financial viability of projects).
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The projects prepared by the GCAs are reviewed by Project studies and appraisal process. The project the Ministry of Social Development (MSD) (previously studies and appraisal process is guided by the known as the Ministry of Planning). The ministry is National Investment System (SNI), which provides a responsible for setting national priorities, appraising set of norms, techniques and procedures governing infrastructure proposals and creating bids. The the public investment process. The objective of the MSD, along with the Ministry of Finance (MOF), is SNI is to improve the quality of public investment in responsible for managing the National Investment Chile by selecting projects with the largest social net System (SNI)1. The MSD is also responsible for: present value (NPV). Projects can be submitted to SNI (i) regulating the procedures for preparing and throughout the year. Projects in SNI undergo a multi- appraising projects which apply for public funding; stage evaluation process depending on their size and (ii) developing and managing an information system complexity. Generally, the larger and more complex for all investment initiatives; (iii) developing project projects go through concept, pre-feasibility, feasibility preparation and appraisal methodologies, including and detailed technical design phases. The steps in the determination of social prices; and (iv) training project studies and appraisal are summarised below: public officials in project preparation. Further, where • Initial review – GCAs present the project outline, the project seeks state funding, the Sub-secretariat along with the justification for the project, social for Social Assessment in the MSD (through its Social appraisal of the project (generally a cost-benefit or Evaluation and Investment Division), evaluates the pre- cost-effectiveness analysis), and the pre-feasibility investment studies of such projects. funding application form to the Integrated Project The Ministry of Finance (MOF) acts as the gatekeeper of Bank (BIP). The BIP provides a record of all project public finances and ensures the alignment of projects proposals in a standardised format and tracks with national fiscal priorities. To ensure PPP programs project development from the initial proposal are aligned with fiscal priorities, a representative from through to ex-post project evaluation. Upon MOF with veto power is permanently assigned to MOP submission of the project proposal, the project is to assess the financial viability of projects. assigned a unique project ID within BIP. The project is reviewed to determine whether it meets the PROJECT PREPARATION LANDSCAPE general project admissibility criteria. At this stage, A snapshot of the project preparation landscape is MOP assesses the completeness of information summarised below: and includes the project in the SNI. Project conceptualisation and planning. Project preparation activities are initiated by the GCAs, which are responsible for the generation of the project idea at both the federal and sub-national level. While Chile does not have an integrated long- term national plan, individual line ministries have prepared long-term sectoral strategies and plans. For example, the Ministry of Public Works has prepared an Infrastructure, Development and Inclusion Agenda – Chile 30-30, which provides a medium- to long- term strategy for infrastructure development and determines the sectoral policies and objectives. Other key sectoral plans include the National Strategy for Water Resources (2012-2025), Regional Plans for Infrastructure and Water Resources (2014-2021), and the National Energy Strategy (2012–2030).
1 The National Investment System (SNI) refers to a set of norms, techniques and procedures which govern the public investment process. It is a model of consistent and transparent investment appraisal, with the objective to improve the quality of public investment.
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• Pre-feasibility and feasibility – After the creation of Capacity building in project appraisal methodologies. the project profile, the project ID enters the SNI Chile has developed its capacity and processes system, where it goes through various stages of for CBA appraisal using sophisticated estimation project appraisal. The GCAs prepare a pre-feasibility techniques, such as shadow pricing, the application study and submit and seek approval through of various estimation assumptions and methods for the SNI system. In the case of PPP projects, the different types of projects, and the standardised use Coordination of Public Works Concessions (CC) of social discount rates and conversions for various assists the GCAs in environmental, sociological, expense and profit values. The MSD appoints a special and engineering matters. The project alternatives project investment analyst (generally engineers are ranked according to their social benefits and or economists), who reviews the project studies the top ranked alternatives are selected for further within a fixed time constraint. The public employees study. During the feasibility stage, detailed appraisal preparing projects in the promoting institutions have on cost-benefit analysis (CBA) or cost-effectiveness a variety of professional backgrounds. In order to analysis is conducted, followed by a detailed build the technical capacity of public officials at all design and technical appraisal of the project, levels, MSD has been undertaking capacity building including engineering and construction studies. The in social project preparation and evaluation of public MSD, through an investment analyst2, conducts employees in the following courses: i) training on the the techno-economic, social, legal, and market Integrated Project Bank (BIP) database; ii) a course appraisals at both the pre-feasibility and feasibility on the Preparation and Social Evaluation of Projects; iii) a course on the Logical Framework Applied to the stage. At each stage, an Economic Technical Formulation of Investment Initiatives; iv) an advanced Analysis Results (RATE) is issued. The projects course on Project Preparation and Evaluation; and v) a that attain a socially recommended (RS) RATE are diploma in Project Preparation and Evaluation. moved to the next stage. Proponents of projects that lack project information or are objected On average, 500 public officials are trained annually. to for technical reasons can provide additional The MSD finances the training and has a budget of information and present a revised version of the approximately US $800,000 annually. project to the SNI within ten working days. The projects which pass the appraisal process by MOP in SNI are shared with MOF for presentation to the congress for the budget.
Project preparatory financing. The projects are largely financed through budgetary allocations. The projects may also be funded under the National Regional Development Fund (FNDR), which provides a sustainable source of project preparatory financing. However, only the projects which have been approved as Socially Recommended (RS) by the competent authorities shall be supported under the FNDR facility.
2 The project analysts involved in appraisal are usually engineers or economists. The public employees preparing projects in the promoting institutions have a variety of professional backgrounds. MSD undertakes capacity building of public employees in project preparation and appraisal.
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SNI – NATIONAL INVESTMENT SYSTEM in refining and strengthening the existing Chile has had success in the systematic appraisal system and making it more robust. The ex-post of public investment projects. The appraisal evaluation is conducted at the following stages: system of public investment started in 1975, with i) following the completion of construction; and the establishment of the National Investment ii) during project operations. The projects are System (SNI), jointly managed by MSD and MOF reviewed on their adherence to the time, cost via the budget office. MSD is responsible for ex- and process standards envisaged. ante project appraisal and ex-post evaluation, as • A centralised publication of social prices to well as systematic data collection and reporting, ensure that projects are evaluated against the while the MOF (through the budget office) sets same benchmarks: MSD annually determines the the public budget. All projects proposed by the social prices of the labour supply, the currency public sector entity must go through SNI. The SNI and discount rate, and other prices commonly is also supported by specific policy and regulatory used in the CBA or CEA analysis, which brings directives. As per Chile’s Law Decree 20530, standardisation to the project cost estimation the capital budget submitted by the Ministry of process across projects. Finance to congress should consider all projects assessed and approved in SNI. This approach has • Guidance manuals for project preparation: contributed to the quality of project preparation The MSD has prepared guidance manuals in with the project being evaluated by both MSD and its portal on the process of project preparation MOF. and the methodology and tools for the CBA and/or CEA assessment across sectors. The The objective of the system is to identify the guidance manuals and tools are fairly robust best projects offering the highest social return. and updated regularly based on inputs from the The system allows the projects within the BIP ex-post evaluations of projects. The availability to compete with each other for resources in the of guidance documents standardises the project annual budget. The key institutional characteristics preparation process across departments and of SNI which facilitate quality project preparation include: across projects. • Independent and transparent project appraisal • A centralised project information system: The standards: The SNI system provides a platform BIP serves as a central repository of project for the independent appraisal of projects and ideas in the country. It also provides information reduces conflict of interest by separating the on the steps in the project appraisal and the project preparation entity and the approval RATE score assigned at each stage of project entity. The role of the project preparation entity preparation. This information serves as guidance (GCA) is to submit the project information in for the project preparation authorities in the the SNI, which is later reviewed by the approval design and preparation of future projects. entity (MSD). The MSD undertakes the detailed • A continuous process of improving project appraisal, and checks the appropriateness of estimates and methodologies by comparing them the methodology applied and the reliability of with the information collected ex-post evaluation information used to calculate the RATE. The of projects: The SNI undertakes an independent RATE score shall determine whether the project ex-post evaluation of projects, which helps will be approved or not.
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3. Guidance for project preparation
Guidance NATIONAL INVESTMENT SYSTEM (SNI)
Owner The Ministry of Social Development
Project PPP project lifecycle development stage
Details The SNI is a modern appraisal online database system jointly managed by the Ministry of Social Development (MSD) and the Ministry of Finance (MOF), which evaluates projects requiring public resources. The SNI has developed standard procedures and guidelines for project evaluation and appraisal to aid with the standardisation of project presentation. Link for further details: http://sni.ministeriodesarrollosocial.gob.cl
Guidance PROJECT INFORMATION SYSTEM (BIP)
Owner The Ministry of Social Development
Project PPP project lifecycle development stage
Details The BIP, the Integrated Project Bank administered by the Ministry of Social Development (MSD), covers the investment initiatives that apply for state funding. The files in BIP contain information on the project, which can be updated by the project promoter. Further, all observations and recommendations made by MSD on the project, for example the RATE assigned, can be seen online. It also acts as a central repository for a historical analysis of the costs and demands of various types of projects. Link for further details: https://bip.ministeriodesarrollosocial.gob.cl
Guidance RULES INSTRUCTIONS AND PROCEDURES PUBLIC INVESTMENT (NIP)
Owner The Ministry of Social Development
Project PPP project lifecycle development stage
Details The Ministry of Social Development has published guidance manuals on the procedures to be followed in the public investment process. These manuals guide public sector institutions in undertaking investment initiatives and the process of project preparation – from project conception to project approval. The Ministry of Finance (MOF) and Ministry of Social Development (MSD) also publish specific guidelines and methodologies on various sectors, social pricing on various sectors, and support tools for the investment initiative. Link for further details: http://sni.ministeriodesarrollosocial.gob.cl/evaluacion-iniciativas-de- inversion/evaluacion-ex-ante/normas-instrucciones-y-procedimientos-inversion-publica-nip/
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4. Project case example: The National Reconstruction Plan of Chile
PROJECT BRIEF QUICK FACTS The National Reconstruction Plan of Chile was a program launched and led by the Ministry of Housing and Urban Development (MINVU) a few months after the massive VALUE earthquake in 2010. Chile was struck by an (IN US $ BILLION) 8.8 magnitude (Richter scale) earthquake on 27 February 2010. It displaced more than 12.8 2.5* million people (75% of the total population) leading to economic losses of US $30 billion (approximately 18% of the Gross National Product of Chile). The disaster affected more than 900 cities and towns in six regions, and damaged 220,000 family homes scattered STATUS in more than 23,000 settlements, including isolated locations. Ongoing The MINVU proposed a reconstruction plan, aligned with the regular government programs, to support the reconstruction and repair of all housing structures. The plan was conceived for the period 2010-2014 for a total budget of US $2.5 billion. It was structured PROJECT OWNERSHIP across three lines of action: i) Housing Reconstruction Program; ii) Emergency MINVU Camps Assistance and Social Condominiums Program; and iii) Territorial, Urban and Historic Heritage Reconstruction Program. This reconstruction plan was conceived of as a driver for national unity and a blueprint for the future development of the country. SOURCE OF PROJECT PREPARATORY FINANCING The plan was monitored at the highest political office in the country (by the President of Chile) Central and state and involved extensive preparatory actions. governments The project is a good example of the benefits of long-term planning, inter-governmental coordination, post-disaster preparatory actions, and stakeholder management. The reconstruction plan is a very interesting case due to its innovative approach in planning and quality assurance. The plan facilitated the SUPPORT AGENCIES construction of more than 94% of the total housing units during the period 2010-2014. Government of Chile, MINVU, SERVIU, SEREMI**
* Initial budget of the reconstruction plan
** SERVIU (Service of Housing and Urban Development) and SEREMI (Regional Secretary) are branches of MINVU.
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION
Feb-10 The earthquake and tsunami affected 1. Program designed to include tailor-made 75% of Chile’s population and destroyed structures to drive universal impact 220,000 homes The housing construction program was designed to address the housing needs of every section of Mar-10 Establishment of the Inter-ministerial the population. The plan has been designed and Committee for medium- and long-term structured in three phases: the immediate plan plans and the National Emergency (restoration of basic services), the winter emergency Committee for immediate action plans plan (to address the immediate shelter requirements before the onset of the winter season following the Mar-10 Creation of innovative planning earthquake) and the reconstruction plan, which instruments (Strategic and Sustainable ensures that priority needs are addressed upfront. The Reconstruction Plans (PRES), Urban plan was also structured across three lines of action3 Regeneration Plans (PRU)) and provided flexibility of choice for the project- affected population. While the program was largely Mar-10 Announcement of the Housing a subsidy-driven program, it also allowed SERVIU4 to Reconstruction Program driven by drive the redevelopment of social housing units. The MINVU project beneficiaries were provided with the flexibility Apr-10 Initiation of registry preparation to select among the choices made available: subsidies for repairing works, subsidies for the construction of May-10 Allocation of subsidies a new house on an existing or new site, or application for social housing units. The beneficiaries (especially Jul-10 The register of disaster victims to landowners) also had the flexibility to select ascertain the subsidy requirements pre-fabricated home designs. was closed by this date to districts under 10,000 inhabitants These non-exclusionary provisions provided the necessary flexibility in the project design and ensured Jul-10 Initiation of construction that every section of the population was covered under the program. Aug-10 Closure of registry of disaster victims 2. Multi-stage assessment in a time-bound manner drives project selection for support One of the biggest challenges of a post-disaster recovery program is the trade-off between timeliness in delivery and quality in appraisal. Chile’s National Reconstruction Plan managed this challenge rather effectively. Project planning and preparation was channelled through the SNI system. The approach to project review and selection varied according to the program component – housing reconstruction, social condominiums, or city reconstruction. For example, in the case of the social condominium program, MINVU undertook three levels of preparatory studies – technical, economic and social – to gauge the extent of the damage and to identify project beneficiaries. The technical studies involved technical assessment of the damage and were conducted by external expert
3 i) Housing Reconstruction Program, ii) Emergency Camps Assistance and Social Condominiums Program and iii) Territorial, Urban and Historic Heritage Reconstruction Program
4 There are two branches of the Ministry of Housing and Urban Development (MINVU) in the regions: the SEREMI (Secretaría Regional Ministerial / Regional Secretary) branch represents the minister and has political responsibilities, while the SERVIU (Servicio de Vivienda y Urbanismo / Service of Housing and Urban Development) implements ministry policies and programs.
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firms. Economic studies were prepared by the SERVIU 4. Innovative tools for private sector collaboration technical team and an external company to prepare an in reconstruction economic evaluation of repair versus reconstruction The urban regeneration programs under the plan were using 2010 standards. Social studies were led by the largely the responsibility of the local governments. local government to assess the social conditions of The government introduced innovative tools to the affected families. Each of the studies were backed facilitate private sector involvement in project planning by a transparent framework for selection. Following and implementation. The National Reconstruction the completion of the studies, 6,415 homes were Plan introduced new planning instruments, such selected for social condominium reconstruction. as the Strategic and Sustainable Reconstruction The schemes were also completed using trusted Plans (PRES), Urban Regeneration Plans (PRU) and developers who were certified by MINVU. Coastal Edge Master Plans (PRBC), which served as tools to promote active private sector participation 3. Decentralisation in planning and the establishment in infrastructure planning and implementation. of empowered cross-departmental teams to The National Reconstruction Plan provided for accelerate decision-making and drive action mechanisms to arrange and finance the master plans The National Reconstruction Plan is an example of during the emergency phase, based on public-private effective collaboration between the central and local partnership agreements between municipalities, governments, especially in a post-disaster scenario. regional governments, companies and social The plan was backed by policy and regulatory reforms organisations, in which the MINVU acted as guarantor. which provided greater decentralisation in planning Under these initiatives, the private sector played an and implementation. Local governments played an active role in preparing the master plan for the regions. active role in supporting preparatory studies (social The plan preparation was funded by corporate funds, condominium projects), collating baseline information multilateral assistance, and private donations. (for subsidy planning) and in end-to-end planning and For example, in the Biobio province of Chile, 27 master execution (territorial/urban reconstruction). Further, plans (nine PRES and 18 PRBC) were developed the MINVU regional team of the affected area, namely with private sector assistance, while 110 master SERVIU, was given authority by MINVU to act as a real plans (PRU) were developed with United Nations estate development mediator and to devise strategy Development Programme (UNDP) assistance. regarding the reconstruction of social condominiums. The master plan served as a guidance for In order to achieve the immediate and winter action project prioritisation. plans, the President of the Republic established an Inter-ministerial Emergency Committee and an Inter-ministerial Reconstruction Committee to coordinate the implementation of the project plans. The Inter-ministerial Emergency Committee focused on the emergency stages and rehabilitation, such as aiding the wounded, searching for missing people, burying the deceased, and re-establishing the normal supply of basic services, such as food, electricity, water, communication and land transportation systems. This committee promoted integrated planning and coordination with the Ministries of Public Works, Internal Affairs and Regional Development, Education, Health, Finance, Economy and Social Development. The Reconstruction Committee was focused on medium- and long-term coordination efforts, such as the encouragement of private contributions and donations to the reconstruction fund. The committees met regularly and drove early reconstruction planning, which helped to avoid duplication of work by the corresponding ministries during implementation of the plan.
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5. Prioritising the preparation of integrated and ENSURING QUALITY AND A GREATER coherent baseline information – a critical tool for PRIVATE SECTOR ROLE IN PLANNING POST- faster decision-making DISASTER RECONSTRUCTION – THE CASE The MINVU realised that an effective and integrated OF THE CITY OF CONSTITUCIÓN, CHILE information database (on the extent of the damage) was The city of Constitución (in the Maule region), critical to aid decision-making and designing of the plan. was one of the most affected coastal cities in The initial estimates of damage provided by the National 5 the aftermath of the earthquake and tsunami. Emergency Office (ONEMI) was considered to be The city had a population of more than 53,000 unreliable. Therefore, the MINVU conducted an extensive at the time of the disaster. The reconstruction time-bound study to estimate the damage levels across plans for the city started with the preparation the following categories: Coast; Urban Adobe; Rural Adobe; SERVIU Social Housing; and Private Housing. After of a Master Plan – the Strategic and studying the data, MINVU arrived at a number of 195,950 Sustainable Reconstruction Plans (PRES) homes eligible for subsidies. To confirm these numbers Constitución. The Master Plan was prepared with the actual demand, MINVU conducted a “demand through a private initiative led by a local private census”, inviting the affected population to enrol in the sector company (Arauco), which entered into register of disaster victims to apply for reconstruction an agreement with the MINVU and local and plan subsidies. provincial authorities. The MINVU provided overall guidance on the proposed outcome of Also to ensure accuracy of the data captured in the the plan. The preparation of the master plan register of disaster victims, the technical staff from the was financed by Arauco and private sector Municipal Works Office visited affected families to certify donations, and developed within a 90-day the extent of damage to their homes. This method timeframe. ensured accuracy of the data captured and also ensured that only those in need received benefits. The project was prepared by an expert team led by Elemental (an architectural firm) and 6. The reconstruction plan provided the affected included Tironi Associates (which provided families with a pivotal role in the design and assistance with stakeholder consultation), implementation of the plan ARUP (an international engineering firm), The MINVU’s objective was to provide construction Marketek consulting, Talca University, subsidies to the affected parties to build an entirely new Foundation Chile (a technology think-tank) house, or to build a house on a beneficiary’s existing and other academic and research institutes. block of land. To apply for a construction subsidy The plan was developed through an active for the construction of a pre-designed project on the citizen participation process and the final beneficiary’s own site, disaster victims owning the land Master Plan document (including a list of had to apply directly to SERVIU (Housing and Urban prioritised projects) was finalised through a Development Service) and choose one of the pre- public referendum. The Master Plan included designed projects. The initiative not only accelerated a portfolio of 28 projects aggregating US the reconstruction process but also provided families $6 billion. The transparency in preparation, with the opportunity to choose their home and become ownership by the government stakeholders, relevant stakeholders in the reconstruction process. and the onus on public consultations helped As per the Ministry of Internal Affairs and Public Safety allay local concerns about the role of the (MISP) report dated 2014, 97% of the people surveyed private party in the preparation of the plan. had knowledge of the plan’s existence and 63% were informed about the projects involved in the plan. This clearly illustrates the robust stakeholder engagement undertaken by MINVU and other agencies.
The MINVU also invited builders to bid on the construction of housing solutions on dispersed sites for a fixed sum of money. This measure benefitted applicant families as it created competition amongst the bidders, which offered better home solutions, such as additional floor space, better furnished houses and extra rooms.
5 This database was populated based on the information provided by mayors and military emergency authorities.
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT APPROVALS AND ENVIRONMENT QUALITY ASSURANCE
Systematic institutional framework at the national Assessment of project proposals by government and sub-national levels for project development agencies and external experts China’s institutional framework for project preparation Project plans in China undergo comprehensive review is designed to be complete and methodical at each tier by the National Development and Reform Commission of the government. (NDRC) and other relevant government agencies, depending on their primary roles in the institutional At the national level, the Ministry of Finance (MoF) set-up. The site selection reports are reviewed by leads the effort to organise and coordinate PPP experts and the local planning departments. Further, projects by developing PPP-related policies and environmental impact assessment (EIA) reports are carrying out the planning and administration of evaluated by environment protection departments PPP projects. Along with the sub-national finance within the relevant level of government for their inputs departments, the MoF is responsible for PPP project and approval. Major projects at the national level identification and screening, budget management, may also undergo thorough due diligence by NDRC- value-for-money evaluation and fiscal affordability authorised companies, like the China International assessments. Engineering Consulting Corporation (CIECC).
PUBLIC SECTOR CAPACITY FOR PROJECT PREPARATION
Using PPP pilot projects as examples to build local capacity and set benchmarks for preparation and procurement As the apex body for PPP-related matters, the Ministry of Finance (MoF), with significant assistance from the China PPP Center, undertakes extensive PPP project development capacity building exercises and initiatives at the national and various sub-national levels. To demonstrate the PPP approach, the MoF has promoted PPP pilot projects that serve as a benchmark and reference for national and sub- national implementing agencies. These pilot projects are intended to function as ‘path finders’, forming replicable and scalable implementation examples. The China PPP Center encourages all local governments to improve on the implementation of these pilot projects and supervise the full project lifecycle, along with periodically disclosing relevant information on the project.
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2. Snapshot of project preparation activities
Towards the second half of the 1990s, China started Commissions. NDRC is also the apex approval body, investing immensely in their public infrastructure, under the supervision of the State Council and with to support the steady economic growth during the coordination of other governmental agencies, for the period. While it started using the PPP model large-scale infrastructure projects undertaken at the to deliver public infrastructure in the nineties, the national and sub-national level. Chinese Government has, since 2014, largely and widely adopted the PPP concept. Ministry of Finance (MoF)
To support this level of infrastructure investment, The MoF is the national fiscal executive agency of the project planning and preparation activities had to be central government which administers fiscal policies thoroughly undertaken by the government and its and the central budget. It is tasked with handling supporting agencies at both the national and sub- fiscal policies, taxation regulations and government national levels. expenditure for the state. The MoF leads the effort to organise and coordinate PPP projects in China INSTITUTIONAL FRAMEWORK by developing PPP-related policies and carrying out the planning and administration of PPP projects in Project preparation activities in China are consultation with other government agencies, such decentralised and are largely driven by the line as the NDRC and the line ministries. It also conducts ministries and their counterparty agencies at the PPP-related policy research, consultation and training. sub-national levels. The State Council, the National To support economic planning, the MoF formulates and Development and Reform Commission (NDRC), supervises the implementation of medium-term and the Ministry of Finance (MoF) and the line ministries annual budget plans, and oversees the implementation play a crucial role in public infrastructure project of fiscal policies and central government expenditure. development at the national level. NDRC and its local counterparts are also tasked with approving or The MoF, along with the sub-national finance rejecting project proposals within their jurisdictions. departments, is responsible for PPP project At the sub-national level, the institutional set-up identification and screening, budget management, mirrors that of the national level, with a planning value-for-money evaluation and fiscal affordability commission within each government supported assessments. by various departments such as finance, urban As the apex body for PPPs in China, under the construction, environmental protection, and supervision of the State Council and with the communications. coordination of other governmental agencies, MoF also undertakes various initiatives to build local National Development and Reform government capacity for PPP project development. Commission (NDRC) MoF is promoting PPP pilot projects to act as NDRC is the national planning commission in China, demonstration projects, which will serve as a basis to housed under the State Council, the administrative determine related benchmarks and references for PPP body of the central government. It is primarily tasked projects in China. So far, it has rolled out four batches with developing, executing and monitoring the of PPP demonstration projects. It also conducts five-year national plans, which provide a strategic training workshops on PPP policy interpretation, foundation for the formulation of the regional plans project management and risk control, and enhancing and annual plans of ministries, which, in turn, drive government capacity building. To augment international infrastructure development in China. NDRC also coordination and cooperation, it has collaborated with organises and coordinates the implementation multilateral institutions, such as the World Bank and the of these plans. The commission houses dozens Asian Development Bank (ADB), and government PPP of departments and offices that are responsible agencies in advanced PPP markets such as the UK, for various functions, ranging from adjusting the Canada, the Republic of Korea and Australia, in order prices of key commodities to formulating large to replicate their best practices within China’s regional development plans. It extends its authority PPP context. down to the provincial, prefectural and municipal levels through the local Development and Reform
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China PPP Center (CPPPC) Project feasibility and structuring. The approach to CPPPC, which is under the MoF, is primarily the planning of infrastructure projects is dominated responsible for PPP-related policy research, by the agencies at the relevant level of government consultancy and training, capacity building, financial responsible for project identification, as they are support, information collection and other matters. responsible for infrastructure policy formulation and Its responsibilities in project preparation include: project planning. The project preparation steps involve a concept proposal, pre-feasibility study, feasibility • Drafting of PPP operational and contract guidelines, study, detailed engineering design, appraisal and final and establishing standardised PPP project approval. There are dedicated technical institutions processes; to assist project preparation in China, typically • Assisting the governments in screening suitable the planning and engineering design institutes of industries for PPPs, selecting appropriate PPP individual line ministries or local governments. models, and carrying out the selection of PPP The project feasibility study results in the preparation demonstration projects; of a draft plan for project approval, which comprises • Providing consultancy and training in technical the project proposal, site selection report, EIA and the support to the government in project identification, feasibility study report. evaluation, bidding, procuring, and contract The project proposal mainly consists of the management with respect to PPP projects; preliminary judgement regarding the project’s viability • Organising training sessions to improve the and it relies on the technical and economic appraisal operational capacity of PPP personnel; of infrastructure projects and the preliminary analysis of the project site, size, investment estimates and • Collecting PPP-related theories and case studies fundraising. within China and abroad to help identify best practices; and As part of the Administrative Measures for Direct Investment Projects in the Central Budget, the project • Developing cooperation and communication with developer is mandated to submit a feasibility study respect to PPP-related activities with international report, along with the project proposal to the NDRC organisations and institutions. when applying for the central investment budget, to serve as the primary basis for making an investment PROJECT PREPARATION LANDSCAPE decision. The feasibility study report should include Project identification and concept definition. field investigations to learn about the land use status Potential public infrastructure projects are identified in the project area and to gather local information by each tier of the government’s relevant sectoral related to natural, economic and social conditions, agencies, such as energy, transport (e.g. heavy rail, a detailed proposed project plan and design, including expressways, highways, seaports, airports, bridges, the site selection, land occupation, construction scale etc.), municipal works (e.g. tap-water plants and and other technical parameters, and predictions of the distribution, wastewater, solid waste, metro, light rail, impact of the project construction on the economy, etc.), environment protection, water conservation, society and ecological environment. agriculture, forestry, science and technology infrastructure, sports, tourism, affordable housing, healthcare, elderly care, education, culture, social security, and governmental infrastructure, etc. These agencies identify projects based on the national and sub-national plans.
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For PPP projects, the relevant sectoral agencies at Project approvals and quality assurance. Approval each tier of the government will prepare the project on the feasibility study report from the NDRC, or implementation program, which is similar to a the relevant DRC, forms the core activity of the final business case document. This involves preparing a approval stage. NDRC, or the relevant DRC, provides project overview, a basic framework for risk allocation, the approval after the assessment of the draft plan project operation methods, a transaction structure, and the completion of departmental reviews, based a contract system, a supervision framework and on project compliance with the relevant laws and the selection of procurement methods. Further, the regulations. The assessment of the draft project governmental sectoral agency will then appoint an plans is undertaken by multiple agencies, depending expert or a third-party professional organisation to on their scope and jurisdiction. The site selection prepare the value-for-money evaluation report for the report of the project plan must be assessed by the proposed project. The relevant finance department, relevant local planning departments, who could, in along with the governmental sectoral agency, will turn, appoint experts for an independent review. The jointly review the value-for-money evaluation report EIA report is evaluated by the relevant environmental in alignment with the project implementation program. protection department for their inputs on the EIA and If the project passes the value-for-money assessment, its approval. Finally, the project developer submits the the finance department then prepares the fiscal project plan to the NDRC, or the relevant DRC, for their affordability assessment for the project. The MoF’s inputs until the review of the EIA, land use and site increasing focus on fiscal affordability has developed selection is completed. The final approving authority in the recent past, to ensure that all project proponents for sub-national projects depends on the size of optimally incorporate and value the total costs of investment. undertaking PPPs. Thereby, the fiscal affordability assessment mechanism for PPP projects was established to efficiently and effectively prevent and control fiscal risks arising from the implementation of PPPs. The mechanisms assist in identifying and measuring the financial expenditure of PPP projects, evaluating the effect of their implementation on annual financial expenditures in current and subsequent years, and providing the basis for the fiscal management of PPP projects.
After the PPP project passes the fiscal affordability assessment, the administrative body of the local government under whose jurisdiction the project sits will approve the implementation of the project and commence the procurement process.
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3. Guidance for project preparation
Guidance GUIDELINES FOR THE ADMINISTRATION OF FINANCE FOR PPP PROJECTS
Owner Ministry of Finance
Project Throughout the project lifecycle development stage
Details These guidelines, circulated by the MoF in September 2016, task the finance departments at all levels of government with arranging PPP project preparation, budgetary funding, procurement, budgetary expenditures and revenues, and performance management etc. For PPP project preparation, these guidelines put the responsibility of the preparation of the project implementation program, which is similar to a business case document, with the authorised project implementing agency, while the finance department is tasked with the responsibility to review the value-for-money evaluation, in collaboration with the relevant governmental implementing agency, and the fiscal affordability assessment. These guidelines provide the basis for evaluating a project for its PPP viability, procurement and fiscal budget management of projects.
Link for further details: http://www.cpppc.org/en/Guidelines/4699.jhtml
Guidance OPERATIONAL GUIDELINES FOR PPP MODE (FOR TRIAL IMPLEMENTATION)
Owner Ministry of Finance
Project Throughout the project lifecycle development stage
Details These guidelines were circulated by the MoF in November 2014 to promote and apply the private-public partnership (PPP) model in a standard manner. The guidelines apply to regulating activities, such as the identification, preparation, procurement, implementation and transfer of PPP projects conducted by the government agencies, private and/or commercial partners and other participants. They provide the government agency responsible with the basic steps to be performed for the above activities. They also provide the basic structure of the project implementation program that is to be prepared by the project implementing agency.
Link for further details: http://www.cpppc.org/en/Guidelines/4049.jhtml
Guidance GUIDANCE FOR THE FISCAL AFFORDABILITY ASSESSMENT OF PPP PROJECTS
Owner Ministry of Finance
Project Project appraisal development stage
Details These guidelines, circulated by the MoF in April 2015, promote the orderly implementation of PPP projects by guaranteeing effective performance of contractual obligations by the government, and effectively preventing and controlling fiscal risks. The fiscal affordability assessment refers to activities to identify and measure the budgetary expenditure of PPP projects and evaluate the implementation of projects in the current and subsequent years, to provide the basis for the fiscal management of PPP projects. This, along with the value-for- money assessment, is a critical step in identifying whether the project can be implemented as a PPP. The finance departments at various levels of government are tasked with reviewing the fiscal affordability assessment.
Link for further details: http://www.cpppc.org/en/Guidelines/4050.jhtml
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GUIDELINES ON REGULATING THE PROJECT DATABASE OF THE NATIONAL PPP Guidance INTEGRATED INFORMATION PLATFORM
Owner Ministry of Finance
Project Project disclosure and monitoring development stage
Details These guidelines, circulated by the MoF in November 2017, provide the necessary conditions to be satisfied by a PPP project in order to be included in the Project Management Database of the National PPP Integrated Information Platform. This platform improves the overall quality of project database management. The provincial finance departments are responsible for project database management at their level. To identify and eliminate unqualified projects that do not meet the specified criteria, the finance departments at various levels set up special working groups.
Link for further details: http://www.cpppc.org/en/Guidelines/6078.jhtml
Guidance GUIDELINES FOR VALUE-FOR-MONEY (VFM) EVALUATIONS OF PPP PROJECTS
Owner Ministry of Finance
Project Project appraisal development stage
Details These guidelines, circulated by the MoF in December 2015, guide the project implementing agencies in the preparation of PPP VfM evaluations, and assist the finance departments at various levels in reviewing the PPP VfM evaluations in a well-regulated and orderly way. VfM evaluations are carried out during the project preparation stage to judge whether a project can be implemented through the PPP route or through traditional procurement. These guidelines provide basic information regarding the preparation of VfM evaluations, qualitative evaluations, quantitative evaluations, evaluation reports and public disclosures. They also provide the basic structure of the VfM evaluation report.
Link for further details: http://www.cpppc.org/en/Guidelines/4023.jhtml
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4. Project case example: Hangzhou International Airport (HGH)
PROJECT BRIEF QUICK FACTS Hangzhou International Airport (HGH) is situated in Xiaoshan in the Hangzhou municipality, the capital of Zhejiang Province. VALUE (IN US $ BILLION) The airport covered an area of 484 hectares (ha) in Phase I and was expanded to about 998 ha in Phase II. HGH is considered as one of the main 1.6* international airports in the Yangzte River Delta region in Eastern China and is one of the top 10 busiest airports in the country. During the period 2007-2012, passenger traffic in HGH more than doubled, increasing with an annual average STATUS growth rate of 19.4% per annum in the decade 2003-2012. Phase I and II Operational The construction of HGH can be divided into three phases: Phase I was completely operational in December 2000, Phase II was completely operational in December 2012, and Phase III is scheduled to be operational in 2035. PROJECT OWNERSHIP Project preparation of HGH commenced in 1992 JV between Airport with an Environmental Impact Assessment (EIA), site selection and a feasibility study. After two Authority Hong Kong and years of planning, site selection was complete Zhejiang Province Airport and Xiaoshan was selected as the final location Administrative Co. for HGH. The EIA and feasibility study reports were approved in 1997. For Phase II of the project, a review was conducted by the environmental protection and land administration departments, and the expansion was approved by NDRC in 2007. SOURCE OF PROJECT PREPARATORY FINANCING National government budget
SUPPORT AGENCIES DDRC, Departments of Planning, Land Administration and Environmental Protection
* Phase 2 expansion project cost; 1 CNY = US $0.15, DDRC – Department of Development and Reform Commission of Zhejiang Province
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Simplified yet robust institutional framework led 1992 Commission of project preparation to extensive project preparation for the airport. This involved an The planning and decision-making are the Environmental Impact Analysis (EIA), responsibility of the Department of Decision site selection and feasibility study and Reform Commission (DDRC) of Zhejiang report (FSR). Province, with assistance from other government departments, such as the Department of Planning, 1994 Site selection was completed and Land Administration and Environmental Protection. Xiaoshan was chosen as the location The project preparation involved the preparation of a for HGH. project proposal, which mainly established whether the project was a viable investment. Further, technical 1997 Approval for the EIA and Feasibility and economic assessments were performed, along Study Report. Phase I of HGH was with a preliminary analysis of the project, site, size, launched. investment estimates and fundraising. In addition to the project proposal, a project site selection 2000 Phase I of HGH was completely and environmental impact assessment (EIA) were operational. completed as a part of the preparation stage. Further, the project developer submitted a Feasibility Study 2005 Planning of Phase 2 started with a Report (FSR) to the DDRC as the preliminary basis review conducted by the Environment on which the project investment decision was made. Protection and Land Administration This fast-tracked the project’s preparation and led to Departments its completion within the specified time and budget.
2007 NDRC provided its approval for 2. Strong quality assurance mechanism to ensure the expansion of the airport and that the streamlined project preparation activities construction was commissioned were high quality
2012 Phase II of HGH was completely Project proposal, site selection, environmental impact operational assessment and the feasibility study report are the main project preparation deliverables that are undertaken by experts with professional qualifications from planning and design institutes. The project proposal underwent a stringent external review, which was then submitted to the DDRC for their inputs on the feasibility report and operability of the project. After the project proposal was approved by the DDRC, the draft plan was reviewed by the departments of planning, land administration and environmental protection. Similarly, the EIA report was reviewed by the environmental protection department. Also, the project developer received feedback from the urban and rural planning department for site selection before the project plan was approved by the DDRC. Further, the project developer submitted the feasibility study report to the DDRC for its approval until the review of the EIA, land use and site selection was completed. The FSR assessment is performed by reputable agencies with professional qualifications that also conduct the technical and economic assessments.
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3. Encouraging capacity development for project planning and implementation through long-standing partnerships
Given the size, complexity and duration of the project, it was critical for project proponents to build know- how on airport construction and management. To this end, HGH entered into a strategic partnership and joint venture with the Hong Kong International Airport prior to commencement of Phase II of its expansion. The aim of establishing the joint venture was to build the capacity of HGH and its staff in all areas of airport management and service concepts. The joint venture between HGH and Hong Kong Airport Authority was established in 2006, for a 30-year period, through the investment of equity capital in HGH’s management institution – Hangzhou Xiaoshan International Airport Co. Ltd.
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT IDENTIFICATION ENVIRONMENT AND CONCEPT DEFINITION
Programmatic approach to project development Long-term strategic plans at the sector level, tied through specialised institutions established by to implementation through government supported the government multi-year schemes
Specialised sectoral institutions, set up by national Individual line ministries at the national level have and sub-national governments, help to streamline and defined long-term visions and goals for infrastructure standardise project development in their respective development within each sector. These long-term sectors. These institutions also liaise extensively with plans are then implemented through multi-year development agencies to help strengthen capacity for schemes with defined project pipelines, thereby project preparation. Over time, these institutions have supporting project identification and prioritisation in evolved to house capabilities for developing projects alignment with the sector’s strategic priorities. within their sectors and provide advisory support to other government agencies in their sector. PROJECT FEASIBILITY AND STRUCTURING Dedicated entity within the Prime Minister’s Office to fast-track national strategic projects Use of standardised sectoral toolkits for the quantitative evaluation of PPP projects In response to project implementation delays in India, the Project Monitoring Group (PMG) was set up under India’s Ministry of Finance (MoF) has designed sector the Prime Minister’s Office (PMO) to provide an specific toolkits that aid in quantitatively evaluating efficient and transparent mechanism to monitor and PPP projects at the pre-feasibility and feasibility fast-track the implementation of strategically important stages. These toolkits are easily available on a infrastructure projects. The progress of all projects dedicated portal managed by MoF and cover four tracked by the PMG is also published on a real time aspects of project preparation – project screening, basis on a dedicated portal maintained by the PMO. financial viability, value for money analysis, and project structuring. Further, model concession agreements Strengthening enabling frameworks for project (MCAs) prescribed for each sector help to standardise preparation at the sub-national level through nodal risk allocation and mitigation in PPP projects. agencies and project development funds
In order to support project preparation activities at the sub-national level, various state governments in India have instituted nodal agencies through the enactment of legislative frameworks. These agencies help strengthen the capacity of state infrastructure development institutions. Further, some states have also set up dedicated project development funds to fund project preparation activities. These funds are in partnership with international development institutions, such as the World Bank, Germany’s Kreditanstalt für Wiederaufbau (KfW), and the Japan International Cooperation Agency (JICA), and thus function to bring in international project development standards for projects at the state level.
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2. Snapshot of project preparation activities
India’s project preparation framework is steered by The Department of Expenditure, also housed under its line ministries and sub-national governments, the Ministry of Finance, is the nodal department for who are adopting a streamlined and systematic overseeing the public financial management system approach to project development. at the national level and overseeing matters related to the state finances. It is responsible for States in India are critical for infrastructure pre-sanction appraisal of major schemes or projects development. While at the national level, there is and overseeing the expenditure management of the a focus on developing key infrastructure sectors central line ministries. like national highways, telecommunications, power, railways and airports, the development of The National Institution for Transforming India other sectors like water and sanitation, health, and (NITI Aayog), the premier planning unit, provides education are shared and often vested in the state directional and policy inputs for infrastructure and governments. Improving the maturity of India’s project PPP development in India. Through its Project preparation activities has placed it well amongst Management Unit (PMU), NITI Aayog aims to support the emerging infrastructure and PPP markets project preparation at the sub-national level, helping around the world. states identify, screen, prioritise, and develop PPP projects for implementation. On the policy front, it has INSTITUTIONAL FRAMEWORK also been tasked with preparing the three-year action Project preparation activities in India are decentralised plan, along with the seven-year strategy and 15-year and are largely driven by contracting authorities. vision document for the development of the country. Line ministries, state and local governments at the sub-national level are responsible for their own Role of the Project Monitoring Group (PMG) project preparation. to fast-track national projects The Department of Economic Affairs (DEA), the In order to efficiently implement infrastructure apex agency for project development in India, is projects, the government established the housed within the Ministry of Finance (MoF). The Project Monitoring Group (PMG) in 2013, Infrastructure Policy and Finance (IPF) division of the to monitor and fast-track stalled public DEA is responsible for analysing public investment infrastructure and PPP projects. PMG is an proposals for infrastructure projects, and handling institutional mechanism set up under the all matters related to non-PPP projects of the line Cabinet Secretariat, reporting directly to the ministries. The IPF division of DEA also hosts a Prime Minister’s Office, to resolve a variety of specialised team under the central PPP Cell section, issues at both central and state levels required which functions as the nodal point of contact for PPPs for faster commissioning of large-scale public in India. It is responsible for: (i) drafting the national infrastructure and PPP projects. PPP policy and programs; (ii) managing the India Infrastructure Project Development Fund (IIPDF) for The processes followed by PMG are available PPPs; (iii) undertaking capacity building programs; (iv) on their website (https://esuvidha.gov.in/) appraising and approving national PPP projects; (v) with the objective of achieving transparency managing and approving financial support for PPPs and efficiency. This helps in fast-tracking the under the Viability Gap Funding (VGF) scheme; and entire process of approvals by enhancing (vi) liaising with development institutions through communication between the investor and technical assistance programs to build local capacity the government. PMG has also initiated the for project development. process of accepting applications for forest and environmental clearances online. After the success of PMG at the national level, a similar kind of mechanism has been implemented by states like Odisha, Uttarakhand, Rajasthan and Uttar Pradesh to address the issues faced by infrastructure projects within their states.
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At the national level, India has also established own or by hiring external consultants and advisors. specialised contracting authorities that focus on To strengthen project preparation, these institutions infrastructure development in specific sectors. develop a set of standardised guidelines and While these institutions are associated with the line frameworks for projects that fall within their jurisdiction. ministries, and owned by the central government, they Most of these specialised institutions have been tasked work as independent entities, carrying out most of the with running a large-scale, long-term, national project preparation and development activities on their level program.
Empowered sector-specific public institutions to MCAs for different modes of project execution, drive infrastructure investment – The case of the thus improving efficiency and transparency on National Highways Authority of India (NHAI) the sharing of risks. Concurrently, NHAI has also NHAI was established in 1988 with a mission to developed and maintained a standardised set develop, maintain and manage national highways of procedures to be followed while undertaking in India. It has been mandated to develop 125,000 project preparation activities. NHAI also routinely km of national highways under schemes like the hires external consultants or experts to prepare National Highways Development Project (NHDP) quality project preparation documents. To enable (50,000 km) and Bharatmala (75,000 km). It has quality assurance, NHAI undertakes independent been instrumental in mobilising private funding for reviews of project feasibility studies, through the development of highways and has pioneered a specialised team within NHAI or through the the transition in infrastructure financing from empanelment of peer consultants. traditional public procurement to PPPs within a As the apex agency for national highways very short period. projects in India, NHAI also routinely undertakes In the mid-nineties, PPPs in the highways sector market consultation exercises, to glean feedback received a lukewarm response from the private from developers, investors and bankers on the sector, owing to poor project preparation and a challenges faced for national highway projects and lack of standardised contractual frameworks. redressal mechanisms to be explored. NHAI was among the first to introduce model As of today, NHAI has awarded more than 610 concession agreement (MCAs) for national projects out of which approximately 300 projects highways, under the Build-Operate-Transfer (BOT) were undertaken using the PPP model. model. Subsequently, NHAI has standardised
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At the state level, the State Public Works Departments PROJECT PREPARATION LANDSCAPE (State PWDs), divisions of the state governments, Project preparation financing. Funding for project undertake the majority of the infrastructure planning preparation activities is largely through budgetary and developing activities. Some states in India that allocations and internal resources of contracting have an explicit legal framework for private investment authorities. For PPP projects, the national government in public infrastructure are Andhra Pradesh, Gujarat, provides funding support through the India Karnataka, Tamil Nadu, Uttar Pradesh, Madhya Infrastructure Project Development Fund (IIPDF). Pradesh, Rajasthan, Bihar, Orissa, etc. Apart from Established in 2008, the IIPDF is a revolving fund with State PWDs, states have also established contracting an initial amount of approximately US $15 million authorities that focus on the development of state funded by the Government of India to support the highways, irrigation, urban development and other process of preparing projects that are viable and infrastructure. For example, the development bankable. IIPDF can be utilised for the preparation and maintenance of state highways is usually of feasibility studies, environmental impact studies, undertaken by state road development corporations. project structuring, and for funding a portion of the To streamline project preparation at the state level, cost of hiring consultants and transaction advisors. most states have enacted state-specific legislation The fund can finance up to 75% of the total project for PPPs, and instituted nodal agencies for project development costs to the sponsoring authority. Upon planning and development. These nodal agencies also successful bidding, the project development costs provide financing support for project preparation. For would be reimbursed to the successful bidder and in instance, the State of Gujarat’s Gujarat Infrastructure case of failure in the bidding process, the sponsoring Development Board (GIDB) plays a pivotal role in authority would be liable to refund the amount of project structuring and planning. It is a focal point financial assistance provided. organisation for infrastructure development in the state, mandated under the Gujarat Infrastructure To empower project development activities at the Development Act. state level, many states have also established their own project development funds. To illustrate, the At the municipal level, infrastructure development Government of the State of Tamil Nadu has set activities are undertaken by municipal corporations. up the Project Development Grant Fund (PDGF) 1 Some metropolitan towns and tier 1 cities have for supporting project preparation in the urban established their own development authorities to plan infrastructure sector. The fund has been financed by and develop infrastructure within their administration. development agencies such as the World Bank, KfW For example, the Mumbai Metropolitan Region and JICA. The PDGF is used to provide grants to carry Development Authority (MMRDA) is responsible for out consultancy assignments, to operate and manage planning, the formulation of policies and programs, resource mobilisation programs, and to implement implementing projects, and directing investment in capacity building, development and training. The the Mumbai metropolitan region. Government of Orissa has also established a state level project development fund, in partnership with KfW, to finance project preparation and the development of bankable projects. In addition to funding project feasibility studies, it also supports the preparation of city development plans and pre-feasibility studies for infrastructure projects.
Project conceptualisation and planning. Currently, the NITI Aayog in India has undertaken the preparation of a national level infrastructure development plan for India. Apart from this, individual line ministries and departments or other contracting agencies in India prepare long-term strategic plans and visions for each sector. Projects are then identified and
1 Tier 1 cities are cities with a population of 100,000 people or more.
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prioritised based on their alignment with the sectoral The Ministry of Environment, Forest and Climate strategic priorities. For instance, the Ministry of Change (MoEFCC) has made Environment Impact Railways has established a Vision 2030, which Assessments (EIAs) mandatory for infrastructure defines, in quantitative terms, the key developments projects. All infrastructure projects are classified under in the rail sector targeted for the period of 2018 two categories, A and B, on the basis of locational - 2030. Typically, these long-term plans are then aspects, impact on human health, and natural and programmed through multi-year centrally sponsored man-made resources. Category A projects are schemes and initiatives, such as Bharatmala for the approved by MoEFCC, while Category B projects are development of national highways, Sagarmala for the approved by the sub-national Environment Impact development, upgrade and modernisation of ports, Assessment Authority. Further, under the Right to Pradhan Mantri Awaas Yojana (PMAY), an affordable Fair Compensation and Transparency in the Land housing scheme, and Atal Mission for Rejuvenation Acquisition, Rehabilitation and Resettlement Act, 2013 and Urban Transformation (AMRUT) and SMART (LARR 2013), procuring authorities are mandated to City Mission, which are combined schemes for water conduct Social Impact Assessments (SIAs) of major supply, sanitation, urban development and housing. infrastructure projects within six months of the project Each of the line ministries then include their financing start date. proposals to execute the identified and approved To aid in PPP project preparation and decision-making, public investment projects (non-PPP projects) in the a series of detailed guidance papers and a PPP Demand for Grants document, which forms the input Structuring Toolkit has been developed by the DEA. for preparation of the central annual budget by the These guidance papers aid in improving the quality Ministry of Finance. of PPP projects being developed and cover the entire Project feasibility and structuring. For public lifecycle of PPP projects. Further, DEA’s PPP Guide for investment projects, a concept paper is prepared at Practitioners also assists the project implementing the project formulation stage for seeking in-principle agencies and authorities to develop their capacity for approvals, holding stakeholder consultations, undertaking PPP projects. conducting pilot studies etc. Project preparation Project approvals and quality assurance. After commences with the preparation of feasibility study preparation of pre-investment documents, inter- reports and includes a Detailed Project Report (DPR), ministerial consultations are held to appraise project pilot experiments and studies for schemes, and the proposals. Project proposals are appraised and preparation of environmental management and approved by the Public Investment Board (PIB) or the social management plans. Delegated Investment Board (DIB), depending on the project size and complexity.
PROJECT APPRAISAL PROJECT APPROVAL
Cost (US $ mn) Appraisal by Cost (US $ mn) Approval by
< 15 Financial Advisor < 15 The Secretary of the Administrative Department
15 – 75 DIB chaired by the Secretary of the 15 – 75 The minister in-charge of the Administrative Department Administrative Department
> 75 PIB chaired by the Secretary, 75 – 150 The minister in-charge of the Department of Expenditure Administrative Department and the Finance Minister
> 150 Cabinet or Committee of the Cabinet
For projects costing less than US $15 million, the projects are appraised by the Standing Finance Committee (SFC) or the Expenditure Finance Committee (EFC).
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3. Guidance for project preparation
Guidance PPP TOOLKIT
Owner Ministry of Finance (MoF)
Project Overall PPP process development stage
Details The PPP Toolkit is a web-based resource, designed to help improve the quality of PPP projects that are developed in India and also assist in improving decision-making for infrastructure PPPs. This toolkit covers five sectors, namely highways, water and sanitation, ports, municipal solid waste management and urban transport.
The toolkit is for use by PPP practitioners across India in both the public and private sectors. It has been designed with a focus on helping decision-making by project officers at the central, state and municipal levels. However, other users, including PPP practitioners in the private sector, are also likely to find the material useful. It should be used as a learning tool and as a resource guide for best practice in PPPs.
The toolkit is further divided into three modules:
1) Project background module: The module provides explanatory and reference material about PPPs. It is a refresher course on important PPP concepts and mainly useful for people who are fairly new to PPPs.
2) PPP process module: This module describes the process of developing a PPP through four phases, from identification of potential PPP projects to preparation and clearance, to procurement and on to management of PPP contracts during the operational life of the project.
3) Tools and resources module: This module contains a set of decision-making tools to help PPP practitioners at important stages of the PPP process. This module also contains downloads and links to other PPP resources and a set of 15 case studies detailing the PPP project experience in India.
Link for further details: https://www.pppinindia.gov.in/toolkit/
Guidance PPP GUIDE FOR PRACTITIONERS
Owner Ministry of Finance (MoF)
Project Overall PPP process development stage
Details This guide is built for PPP practitioners within the government and its different tiers across the country, to assist them in conceptualising, structuring and implementing projects via the PPP route. This guide will serve as a manual for practitioners to develop projects through the appropriate PPP framework, improving the quality of PPP projects in the country.
The PPP Guide is divided into 17 modules mainly focusing on key takeaways, best practices, case studies, PPP concepts, etc.
Link for further details: https://www.pppinindia.gov.in/documents/20181/33749/ PPP+Guide+for+Practitioners/
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Guidance NHAI WORKS MANUAL
Owner National Highways Authority of India (NHAI)
Project Project feasibility and structuring development stage
Details The NHAI Works Manual details the project preparation and approval processes followed by NHAI for the implementation of public investment projects, as well as PPP projects.
This manual details the contents and the parameters to be focused on while preparing the pre-feasibility study, feasibility study, preliminary project report, and Detailed Project Report for both public investment projects and PPP projects.
This manual also details the quality assurance mechanisms, such as peer consultant reviews and proof consultant reviews, to be followed in order to maintain the quality of the project preparation documents.
Link for further details: http://www.nhai.org/Doc/Manual/NHAI%20Works%20Manual%202006_ new.pdf
Guidance APPRAISAL AND APPROVAL OF PUBLICLY FUNDED SCHEMES AND PROJECTS
Owner Ministry of Finance (MoF)
Project Appraisal and approvals development stage
Details The Appraisal and Approval of Publicly Funded Schemes and Projects provides a systematic process to be followed for the formulation, appraisal and approval of publicly funded schemes and projects. The guidance document lists the project preparation documents that are required along with their general structure. It also highlights the institutional arrangement for the appraisal and approval of schemes and projects, along with the delegation of appraisal and approval responsibilities in the case of projects with a lower total cost. Further, the documents also provide the timeframe required for the appraisal and approval of publicly funded schemes and projects.
Link for further details: https://www.finmin.nic.in/sites/default/files/GuidelinesAppraisal_Approval_ Schemes_Projects_0.pdf
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Guidance GUIDANCE FOR FORMULATION, APPRAISAL AND APPROVAL OF CENTRAL SECTOR PPP PROJECTS
Owner Ministry of Finance (MoF)
Project Appraisal and approvals development stage
Details The Guidance for Formulation, Appraisal and Approval of Central Sector PPP Projects provides the detailed process to be followed for the appraisal and approval of PPP projects. It describes the institutional structure, along with details of the responsibilities of the entities involved. It also describes the structure of the memorandum required to be prepared for the PPP Appraisal Committee in order to obtain its ‘in-principle’ and final approval. Further, this document also specifies the time required for various steps under the appraisal and approval procedure for PPP projects. It also describes the delegation of appraisal and approval responsibilities in the case of PPP projects with lower costs.
Link for further details: https://www.pppinindia.gov.in/documents/20181/21751/PPPAC_ GuideLines_2013.pdf
Guidance MODEL CONCESSION AGREEMENTS
Owner National Highways Authority of India (NHAI), Ministry of Shipping
Project Project structuring development stage
Details Standardised contractual documents, such as sector-specific Model Concession Agreements (MCAs), which lay down the standard terms relating to the allocation of risks, contingent liabilities and guarantees, as well as service quality and performance standards, have been developed by various central ministries in India.
These documents help to structure projects and provide standardised guidance on project risk identification, allocation and mitigation mechanisms at the preparation stage.
Link for further details: https://www.pppinindia.gov.in/standardized-bidding-documents
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4. Project case example: Delhi Metro Rail Corporation (DMRC) – Delhi Mass Rapid Transit System (MRTS) Phase I
PROJECT BRIEF QUICK FACTS The Delhi MRTS project was one of the largest metro projects and the second MRTS in India after the Kolkata Metro. It is considered a VALUE good example for public sector infrastructure (IN US $ BILLION) projects in India, mainly because the project finished within the stipulated time and budget. 2.1* Delhi MRTS has been profitable since the start of its operations and is among very few metros worldwide that do not depend on government subsidies.
Delhi MRTS was proposed to cover the entire city, along with the adjoining areas like STATUS Gurugram, Noida, Ghaziabad etc., with a total Operational network of about 405 km. The construction was divided into four phases spread over a duration of more than 20 years. Delhi MRTS was important for the city of Delhi, as it would alleviate Delhi’s ever-growing transport congestion and vehicle pollution. PROJECT OWNERSHIP The Government of India (GoI) and the Government of the National Capital Territory of GoI and GNCTD Delhi (GNCTD) established a 50:50 joint venture firm named Delhi Metro Rail Corporation Limited (DMRC) in 1995 for the purpose of constructing Delhi MRTS. Phase I of the Delhi MRTS project of 65 km in length was sanctioned by the Union Cabinet in September SOURCE OF PROJECT 1996. Delhi MRTS started its operations in 2002 PREPARATORY FINANCING with an eight km line (the red line) connecting Shahdara and Tis Hazari (Phase I). GoI and GNCTD
Delhi MRTS Phase I was constructed with a total investment of US $2.1 billion at an average cost of US $32 million per km. Extensive pre- investment activities were undertaken by Rail India Technical and Economic Services Ltd. (RITES), an engineering services company SUPPORT AGENCIES and Government of India enterprise, during RITES, Delhi Development the project development phase. RITES was, in turn, supported by financing from the Japan Authority (DDA), JICA International Cooperation Agency (JICA), who funded around 60% of the total project cost of Phase 1 in six tranches, starting from 1997. The rest of the funding was mainly secured from the GoI and GNCTD.
*Estimated Exchange Rate: Rs. 1 = US $0.014 (as of December 2018)
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Strong leadership, along with the necessary 1989 Preparatory activities for developing the institutional support and enabling framework, allows MRTS system were commissioned by for smooth progress of the project GNCTD and GoI For the successful implementation of large and 1991 Preparatory activities completed complicated infrastructure projects, it is critical to by RITES have strong leadership and vision. The majority of credit for the successful implementation of the 1994 Central cabinet provided their go-ahead Delhi MRTS goes to strong leadership under the for the Delhi MRTS and directed GNCTD management of DMRC, who developed capabilities to take up preparation of DPR in July for completing projects on time and within budget 1995 RITES finalised the DPR in May through a culture of punctuality, integrity, professional competence and social responsibility. 1995 DMRC, a joint venture between GoI and GNCTD, was established in May 2. An independent and effective institutional setting DMRC was established as a joint venture (JV) between 1996 The union cabinet sanctioned the the GoI and GNCTD, where neither the central nor Delhi MRTS Phase I in September the state governments had majority control. The 1998 Construction was commissioned in management of DMRC had complete freedom, which October allowed them to make decisions free from compulsion, and depended on the government only for funding 2002 Commercial operations for part of and land acquisition. This institutional setting proved Delhi MRTS Phase I effective in minimising interference from politicians and bureaucrats. 2006 Delhi MRTS Phase 1 was fully operational In the initial phase of the project’s implementation, a Japanese firm, Pacific Consultants International, and its JV were appointed as a general consultant to provide a team of international and Indian experts. Due to political interference, DMRC was urged to withdraw their association with the Japanese firm but DMRC defended its decision. This decision helped in the initial phase of the project, as the selected consultant team not only acted as a bridge between DMRC and JICA, but also provided the necessary technical and management expertise and knowledge of tunnelling technologies, management ethos and value for time, leading to capacity building of the DMRC staff and thus reducing the dependence on international experts in the subsequent phases of Delhi MRTS.
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3. Collaboration with international institutions 5. Availability of adequate and sustained for capacity development during the initial phase project preparation financing of Delhi MRTS GNCTD commissioned RITES Ltd. to conduct the Collaboration with the Japanese experts and cross- project preparation activities for the integrated multi- learning was an integral part of the project design. modal MRTS for Delhi. As the project preparation DMRC engineers were encouraged to learn tunnelling activities for Delhi MRTS were funded by GNCTD and technologies, management ethos and value for time, were carried out by a Government of India enterprise, along with other management techniques from their extensive project preparation activities were Japanese counterparts. To strengthen their own undertaken to study the viability of the project. The technical expertise and human resources, DMRC DPR for Delhi MRTS had around 50 technical reports, made sure that its staff members were central to 101 tender packages and 2,066 drawings. These the project and did not rely overly on the general reports addressed various aspects of the proposed consultants. Starting with Phase I, DMRC planned to Delhi MRTS. reduce their dependence on the external experts in subsequent phases by deploying their own personnel in consulting services and allowing them to obtain relevant technical experience from the start. DMRC established a training institute to pass on technical expertise from its own personnel to the implementers of new metro projects in India. DMRC also began to disseminate its knowledge and expertise through consulting work on new projects in India and abroad. These efforts allowed DMRC to effectively accumulate technical expertise and systematically leverage it to establish a strong reputation for itself.
4. Effective stakeholder coordination For the necessary land acquisition, DMRC submitted the amount required for resettlement and compensation to the GNCTD and the required processes were carried out by the land acquisition officer of the government. Further, it was also important to have project engagement and interactions with the local authorities and other agencies especially during the planning and construction of underground sections of the MRTS. Before the ground was excavated, a complicated network of water supply and sewerage pipes had to be shifted or diverted. Cooperation, involvement and communication with other government agencies in charge of these utilities was important in getting their buy-in and participation. To improve and increase collaboration with these government agencies, DMRC also recruited retired personnel from the said agencies. Due to this, DMRC ensured that grievances from various stakeholders were minimised and the project timelines were adhered to.
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT APPROVALS ENVIRONMENT AND QUALITY ASSURANCE
Domestic infrastructure financing institutions Defined four-step land acquisition process created by the Ministry of Finance are introducing to minimise delays in land acquisition good practices in project preparation with a ‘learning- To address one of the most complex project by-doing’ approach development activities, Indonesia has reformed Indonesia has created specialised financing its land acquisition law that mandates a four-step institutions that are championing the adoption of good process for acquiring land for development. Each project preparation by working closely with national stage of the process is detailed with the activities to and sub-national agencies to help them address be performed, which institution is responsible, and the existing roadblocks to infrastructure development in requirements to proceed to the next stage. Within the Indonesia. Together, these institutions aim to develop framework, the maximum duration for land acquisition a pipeline of bankable infrastructure projects in a is capped at 583 days, eliminating the possibility market where the government counterparty capacity of any further delays in project development due to is still not fully developed. land acquisition hurdles. The law has progressed in addressing the hurdles in land acquisition to an extent, and needs to be followed by effective implementation PUBLIC SECTOR CAPACITY to realise more benefits. FOR PROJECT PREPARATION
Sustained capacity building programs in partnership PROJECT MARKETING AND with development institutions STAKEHOLDER ENGAGEMENT Faced with the challenge of weak institutional capacity Public consultations are mandated for all PPP at various tiers of the government, these agencies projects at the feasibility stage have designed several programs in line with global standards. These initiatives are not limited to formal To address concerns of inadequate stakeholder programs, but also involve more informal support and consultation in project preparation, public guidance to help develop projects. The Development consultations and market sounding are now Finance Institutions (DFIs) have partnered with mandatory for all PPP projects, at the pre-feasibility international development agencies and academic (Outline Business Case) and the feasibility (Full institutions to customise global knowledge in project Business Case) stages. This helps to resolve as many preparation and project management that could stakeholder issues as is practically possible in the be practically implemented in Indonesia given project preparatory cycle. its existing constraints.
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2. Snapshot of project preparation activities
INSTITUTIONAL FRAMEWORK Each institution has clearly defined roles and Indonesia’s progression in project preparation has responsibilities, stipulated in the presidential been founded more on learning-by-doing, based on regulations enacted to establish these institutions. its own challenges. In recent times, the MoF has established its own While Indonesia’s PPP regulations date back to 2005 Project Development Facility (PDF) that is seeking (they have since been replaced by new presidential to prepare its first set of PPPs as per international regulations in 2015), not many PPPs, apart from the standards. The MoF is receiving technical assistance electricity independent power producers (IPPs)1 and from the World Bank and the Government of Canada. a few toll roads, could take off in the first few years To facilitate coordination and early identification of the program. Inadequate project preparation, land of prospective PPP projects, a Joint Office has been acquisition delays, lack of long-term project finance established in the Ministry of Planning (BAPPENAS). and perceptions of high-risk regarding Indonesia’s infrastructure sector were some of the major issues Ministry of Finance (MoF) impacting the progress of PPPs in the early years. The MoF has been championing policy support The heightened risk perception was formed in large to PPPs, including their project preparation and part by a lack of policy coordination between the financing, in Indonesia. The MoF has adopted a two- various government ministries and agencies. pronged approach in promoting PPPs. Firstly, at the ministry level, the MoF has a special directorate – the Recognising the need to plug the gaps in its enabling Directorate of Government Support and Infrastructure policy and institutional environment, Indonesia has Financing Management2, which provides policy and systematically implemented a series of initiatives approvals on government support mechanisms. The in the last decade. Key amongst these have been government policy places emphasis on high standards the creation of PT Sarana Multi Infrastruktur (SMI), of project preparation to obtain best value for money a Ministry of Finance (MoF) backed institution for the government. The respective policies for viability to advise and lend to infrastructure projects, the gap funding (VGF) and guarantees stipulate that PPP Indonesia Infrastructure Guarantee Fund (PT projects will only be eligible for government support Penjaminan Infrastruktur Indonesia (PII), or IIGF), if they are well-prepared PPP projects, as per MoF a MoF backed institution to provide guarantees on project preparation standards, and where the PPP government counterparty contractual obligations, procurement has been competitively undertaken. and Indonesia Infrastructure Finance (PT IIF), which Recently, the directorate has also established its is a donor supported financial institution to provide own project development facility (PDF)3 to assist long-term project finance. These institutions have government contracting agencies in hiring transaction become operational in the past few years and their advisors and undertaking feasibility studies and key focus has been to support the government in PPP procurement. The PDF is in its early days, and developing a project pipeline that could be supported in the process of establishing its standard operating by their downstream financial products. It has been procedures, as it seeks to prepare its first set of PPPs. the concerted effort of these infrastructure finance institutions that has made progress in recent years Secondly, the MoF has established key infrastructure in undertaking good project preparation and helping finance institutions to scale up financing. As mentioned projects achieve commercial and financial close. previously, these institutions are adopting international Good practices in project preparation are being good practices to prepare projects. The IIGF and the infused through project preparation assistance SMI are fully government owned, while the IIF has a provided by the infrastructure finance institutions, diversified ownership. who have been supported by international development partners, such as the World Bank, the International Finance Corporation (IFC) and the Asian Development 2 More information can be obtained at http://www.djppr.kemenkeu. go.id/ppp Bank (ADB). 3 The legal basis for the PDF in Indonesia is based on the Presidential Regulation No. 75 of 2014 on Acceleration of Prioritized Infrastructure Provision, the Minister of Finance Regulation No. 1 The Ministry of Energy and Mineral Resources supervises the 265/PMK.08/2015 on Facilities for the Project Preparation and procurement and contracting of electricity IPPs under its sector Transaction Advisory of PPP Projects, and the Minister of Finance regulations and these projects do not go through the national level Regulation No. 129/PMK.011/2016 on Amendment of Minister of PPP process. Finance Regulation No. 265/PMK.08/2015.
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Together through these two approaches, MoF is government agencies in their project development seeking to improve the quality of project preparation activities by supporting the preparation of business and streamline government coordination, thereby cases, providing funding assistance for project addressing the two critical roadblocks faced by preparation, conducting capacity building and creating infrastructure projects in Indonesia. an ecosystem of cooperation for infrastructure development. PT SMI also provides active assistance PT Indonesia Infrastructure Guarantee Fund (IIGF) to the MoF in managing their PDF and in supporting In response to the global financial crisis and to crowd-in government agencies on project preparation. private investment, a separate guarantee fund, IIGF, was established in 2009 and became operational in PT Indonesia Infrastructure Finance (IIF) 2010. The IIGF extends guarantees4 to PPPs in relation PT Indonesia Infrastructure Finance was to assuring government counterparty contractual established in 2010 as a private non-bank financial obligations under the PPP agreement. To date, IIGF institution, under an initiative of the Government has issued guarantees to eighteen PPP projects. of Indonesia, in cooperation with the World Bank, A key requirement for IIGF guarantees, as stipulated the Asian Development Bank (ADB) and other in government regulations, is that the project needs international multilateral agencies. It is focused to be prepared to international standards and must on investing in commercially viable infrastructure be competitively procured. With the assistance from projects in Indonesia and it encourages private the World Bank, IIGF, through its standard operating sector engagement in the country’s infrastructure procedures, has strengthened its project preparation development. By virtue of its reputable shareholders5, functions, including environmental and social the IIF functions to high standards of corporate safeguards management to help the guaranteed governance and project preparation. For instance, the projects meet international standards. The IIGF also IIF’s Social and Environmental Management Systems operates its own project preparation assistance comply with performance standards of the World facility, wherein it provides technical assistance Bank, the IFC and the ADB. Accordingly, it imposes for and closely supports government agencies with these high standards on its supported projects. project preparation and open procurement. In addition, the IIGF Institute provides PPP-related capacity Indonesia Ministry of National Development building to various government stakeholders and Planning to help strengthen their implementation. As the apex planning agency in Indonesia, BAPPENAS plays the dual role of a planning and monitoring PT Sarana Multi Infrastruktur (SMI) institution and a think-tank to further good practices PT SMI is a wholly-owned entity of the MoF with on project preparation in the country. BAPPENAS is a mission to act as a catalyst for infrastructure primarily tasked with preparing and monitoring the investment in Indonesia. PT SMI finances both national long-term and medium-term development publicly and privately funded projects and has its own plans for Indonesia. At present, BAPPENAS is focusing capital base, as well as other lines of credit provided on introducing international good practices in project by international development partners to finance selection and preparation. BAPPENAS prepares and infrastructure. As part of its mandate, PT SMI assists documents the PPP project list for Indonesia through its annual publication of the PPP Book. The PPP Book comprises a project pipeline developed as a 4 The risks covered include: approvals and licensing delays, delays result of screening by BAPPENAS from the proposed in land acquisition, change in law, break of contract, revenue and pricing risks, government counterparty payment risks, expropriation, project pipelines submitted by the Ministers, Heads force majeure, termination payments risk etc., as long as these risks of Institutions and Heads of Regions. The PPP Book are contractually taken on by the relevant government counterparty. provides a transparent view on the evolving PPP IIGF guarantees can be extended to up to 25% of IIGF’s net worth into a PPP project. When providing the guarantee, IIGF will charge pipeline in Indonesia, listing out projects which are both an upfront and annual underwriting fee. In case a guarantee is ready to move to the procurement stage, as well invoked, IIGF will make payments as per a due process specified in its operations manual and then have a recourse to the future budget as those still under development. allocations available to the concerned government counterparty agency. Under the recourse mechanism, the MoF will reimburse IIGF for the amount of the guarantee called and paid, and MoF in return 5 The shareholders are PT SMI (30%), ADB (19.99%), IFC (19.99%), will recoup the money from the budgetary allocations available with Kreditanstalt für Wiederaufbau (KfW) (15.12%) and Sumitomo Mitsui the concerned government counterparty agency. Banking Corporation (14.9%).
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Committee for the Acceleration of Priority The overall infrastructure project preparation process Infrastructure Delivery (KPPIP) in Indonesia spans three broad phases:
KPPIP functions as the point of contact to facilitate • Planning phase, which includes project coordination in debottlenecking efforts for National identification and selection, and establishment of Strategic Projects and Priority Projects. It plays a a priority project list. GCAs identify and conduct central role in monitoring, coordinating, and speeding preliminary studies on projects that help to up the deliveries of strategic and priority PPP projects, meet Indonesia’s long-term development goals. sometimes commissioning or amending the pre- During the preliminary study stage, a project is feasibility studies to prepare them for the market. to be evaluated based on its strategic rationale, Led by the Coordinating Minister for Economic Affairs compliance with existing regulations and a broad as the Chairperson, representation from all major value for money assessment accompanied by institutions in Indonesia enables KPPIP to aid the revenue arrangements (in the case of PPPs). acceleration of priority project development. Projects that are deemed viable proceed to the preparation stage. State Asset Management Agency (LMAN) LMAN was established in 2015 by the Ministry • Preparation phase, which involves the preparation of Finance, to facilitate the financing of land for of a preliminary pre-feasibility study (Outline infrastructure projects and speed up the process of Business Case (OBC)), and the preparation of a land acquisition in Indonesia. It provides funding for project readiness assessment (Final Business land acquisition for nationally significant PPP projects, Case (FBC)). At OBC stage, the project undergoes in addition to performing the function of a land bank a series of quantitative studies to evaluate its by acquiring land required for the construction of viability in terms of financial and economic value, priority projects. The LMAN also runs and maintains and risk analysis and mitigation. At the FBC stage, a registry of land parcels and manages a revolving the project must fulfil all requirements of the fund for land acquisition for PPP projects in toll roads, pre-feasibility study including follow-up issues, rail infrastructure, ports and dams. While LMAN approval of the PPP by stakeholders through public funded land acquisition up to approximately US $1 consultations and market sounding, and certainty billion6 for toll road projects in 2017 alone, its budget on whether government support is required. for 2018 was more than double, at approximately • Transaction phase, which follows the completion US $2.5 billion. of preparatory activities marked by a final business case report and drafting the business entity PPP Joint Office procurement plan. Set up in 2016, the PPP Joint Office is to function as the ‘coordinating or clearing house’ for PPP projects, How does the institutional set-up in Indonesia aid prior to being sent for approval to the MoF. The office in accelerating project development activities? comprises members from KPPIP, BAPPENAS, MoF, It is well acknowledged that Indonesia’s GCAs do Ministry of Home Affairs, Indonesia Investment not have strong institutional capacity in PPPs and this Coordinating Board, National Public Procurement has impacted the pace of PPPs in reaching financial Agency, and the IIGF. The aim of establishing the PPP close. Efforts of the past few years are being invested Joint Office is to encourage cross-sector and cross- in developing standardised processes and guidance agency coordination for project implementation. It to address their capacity issues. comprises middle management-level representatives from all major governmental institutions, with each • Defining overarching goals to assist project member of the office tasked with a specific role and conceptualisation. Indonesia’s long-term and authority, depending on the scope of its functions. medium-term development plans, RPJPN7 and RPJMN8, prepared by BAPPENAS, serve as guiding PROJECT PREPARATION LANDSCAPE posts for GCAs to draft their strategic plans and Project preparation activities in Indonesia are conceptualise projects. While the RPJPN has a decentralised, with government contracting authorities long-term outlook of 20 years, the RPJMN takes (GCAs) entrusted with the responsibility of project a medium-term view of every five years within the development. GCAs perform this function under the umbrella of the national PPP policies and regulations. 7 Rencana Pembangunan Jangka Panjang Nasional (Long-term Plan).
8 Rencana Pembangunan Jangka Menengah Nasional (Medium-term 6 Exchange rate, IDR 1 = US $ 0.00007 (as of December 2018). Plan).
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20-year period and allows separate governments to set their own priorities in the process of national PT SMI’s project preparation assistance economic development. Each RPJMN defines the in practice target for the provision of basic infrastructure in 1. Assistance to the Ministry of transparent, quantitative terms; for instance, the Communications and Informatics to prepare latest RPJMN 2015–2019 targets that Indonesia bid documents, and transaction advisory should have 100% access to clean water from the on the Palapa Ring Project. 70% baseline in 2014. These clearly defined targets help the GCAs to work towards a common goal. 2. Providing inputs for the optimisation of technical schemes and the government • Using multi-criteria analysis to screen and prioritise funding structure for the West Semarang projects objectively. To include projects from Water Supply Project. GCA strategic plans in the PPP Book, BAPPENAS follows a multi-criteria process. Each project 3. Preparing the pre-feasibility study for the is evaluated on factors such as technical and Median Transportation Project and advisory economic rationale, demand sustainability, to increase the feasibility and bankability of the project. support from stakeholders, compliance with laws and regulations, conformity with the national 4. Cooperation with development institutions development plan, spatial planning, value for such as the Japan International Cooperation money, potential revenues, and project financing Agency (JICA) and the ADB for feasibility scheme. While this process is not institutionalised studies for the Dr. Pirngadi Regional Hospital for GCAs, BAPPENAS also provides ad-hoc Medan PPP Project and the Suramadu assistance to GCAs in screening projects based Bridge Toll Road PPP Project. on their level of readiness and benefits to society in accordance with the development plans.
• Enhancing capacities of GCAs to undertake project • Providing standardised guidance documents preparation in line with global standards. The MoF to streamline project preparation. Drawing from supported Development Finance Institutions (DFIs) its expertise in appraising project risks to issue in Indonesia aid in capacity building for GCAs guarantees, the IIGF has published a best practice through formal programs and informal assistance. standard on risk allocation. This guidance The IIGF has created a learning academy called document provides 1) a risk category and 2) a the IIGF Institute, which provides training risk allocation matrix to be used as a reference by on PPPs through its General Active Learning GCAs in preparing the risk allocation of the PPP Program (GALP), an online learning tool. It has project, to enhance the implementation of the also collaborated with the University Network for risk management framework for both economic Indonesia Infrastructure Development (UNIID) and and social infrastructure PPP projects. As the the Indonesian College of Infrastructure Network apex agency for project planning in Indonesia, (JPII) to organise the Indonesia Infrastructure BAPPENAS has also issued guidelines on preparing Roundtable (IIR), which is a series of discussions outline business cases, which provides detailed on the preparation of business cases for steps to be followed by GCAs in each procurement infrastructure projects. Similarly, PT SMI conducts stage, namely (i) planning (identification, budgeting, capacity building and socialisation activities, as categorisation), (ii) preparation (pre-feasibility well as Focus Group Discussions (FGD), which study, government support, guarantees), and involve the local governments, investors, and other (iii) transaction (market sounding, public tender, relevant ministries. Further, by providing technical agreement, financial close). project preparation assistance and advisory support for projects, these DFIs help to build GCA capacity by playing an active role in encouraging the acceleration of prioritised, strategic, national and regional infrastructure development. Through continued support and liaising with international development institutions, these DFIs are transmitting international good practices to infrastructure in Indonesia via a learning-by-doing approach.
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• Ensuring availability of adequate funding to • Addressing proximate factors that lead to undertake project preparation activities. To assist bottlenecks in project implementation at the financing of project preparation activities, PT SMI preparation stage. Indonesia’s legal and regulatory manages two funds: framework provides for mechanisms to address challenges that affect project implementation. ––PPP Project Development Facility (PPP-PDF): To mitigate risks arising from land acquisition, Law The PPP-PDF provides funding to assist GCAs to No. 2 of 2012 clearly defines the responsibilities prepare the feasibility studies and to assist with of sectoral ministries and regional governments transaction advisory until the project reaches to aid with land acquisition. Delays in the land financial close. Priority PPP projects, as well as acquisition process are addressed by capping non-priority projects that have completed market the time period for the complete process at sounding and can demonstrate investor interest, 583 days. The law also permits the private are eligible for assistance under this scheme. sector to procure the land first and then claim ––Regional Infrastructure Development Fund- reimbursement from the government through Project Development Facility (RIDF-PDF): This the LMAN, instead of waiting for approvals from is a grant targeted at local governments in the annual budgetary process. Through these Indonesia to undertake project identification interventions, the land acquisition law has been and preparation activities. Budgeted at US $3 a step forward in addressing the major land million for a period of five years9, the fund was acquisition hurdles faced by infrastructure projects established in cooperation with the Government in Indonesia. The law is currently faced with of Switzerland and the World Bank. implementation issues, so ongoing government support will be critical to realise the full benefits of this law. Further, Presidential and BAPPENAS regulations mandate that all PPP projects must include public consultations, to be carried out at the planning stage by the respective GCAs. The aim of undertaking these consultations is three- fold: (i) explore compliance with social norms and environmental norms in accordance with the provisions of the environmental legislation; (ii) receive input on community needs related to the PPP; and (iii) ensure PPP readiness.
9 PT SMI received a grant of US $3 million over five years, however the overall size of the loan to the RIDF-PDF was US $100 million.
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3. Guidance for project preparation
Guidance RISK ALLOCATION GUIDELINES
Owner Indonesia Infrastructure Guarantee Fund (IIGF)
Project development Feasibility study and project structuring stage
Details IIGF’s risk allocation guidelines provide a risk category checklist which can be used to identify risk events for PPP projects.
This checklist is further elaborated upon through comprehensive sector-specific risk allocation matrices for all PPPs within the following sectors: water supply, waste management, roads, electricity, energy conservation, oil and gas, rail transportation, bus rapid transit, seaport, airports, telecommunication, urban infrastructure, health, public housing, education, sport facilities, tourism and correctional facilities.
The risk matrices identify the risk events within each risk category and provide a guide to risk allocation based on the PPP structure, along with suggested mitigation strategies.
The guidelines function as a key reference for the GCAs in developing PPP contracts, and for investors and financiers in assessing their investment and PPP financing opportunities in Indonesia.
Links for further details 2017 version in English: https://www.iigf.co.id/media/kcfinder/docs/risk-allocation-guideline- 2017-tanpa-sambutan.pdf (2017 version in English)
2018 version in Bahasa Indonesia: http://www.iigf.co.id/media/kcfinder/docs/final- 20180305-acuan-alokasi-risiko-bahasa-2018-clean-newlogo.pdf (2018 version in Bahasa Indonesia)
Guidance PROCEDURAL GUIDELINES FOR PPPs
Owner BAPPENAS
Project development Planning, feasibility study, procurement stage
Details BAPPENAS Regulation No. 4 of 2015 specifies procedural guidelines for PPP arrangements and the responsibilities of PPP nodes, PPP teams and procurement committees established under regional governments and sector ministries.
These guidelines define the role of GCAs and PPP nodes, the stages of PPP implementation and institutional responsibilities at each stage, activities to be performed at the pre-feasibility and feasibility stages, structure of the outline and final business cases, forms of government support, and procedures for unsolicited proposals.
Link for further details: http://kpsrb.bappenas.go.id/data/fileregulasi/PPP%20 REGULATION%20(ENGLISH%20version).pdf
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4. Project case example: Umbulan Water Supply Project
PROJECT BRIEF QUICK FACTS The Umbulan Water Supply System project was initiated in the 1980s to meet the growing needs of clean water distribution in the East Java province of Indonesia. VALUE Structured as a Build-Operate-Transfer (BOT) (IN US $ MILLION) scheme, with a concession period of 25 years, the project involves the construction of the 157* production system, the transmission pipeline and offtake for five regencies and cities. Once operational, the water supply system is expected to deliver 4000 litres per second of clean water through a 93-kilometre water supply pipeline. STATUS While the project was originally planned and conceptualised by the Government of East Under construction Java Province up to 40 years ago, with multiple studies and tendering processes carried out between 1988 and 1999, it was tendered successfully only in 2010.
The Umbulan Water Supply System project is a flagship PPP project of Indonesia, being PROJECT OWNERSHIP the first to receive viability gap funding from Government of MoF, and the first water sector PPP project in Indonesia guaranteed by the IIGF. The history East Java Province of this project demonstrates the evolution of experience in Indonesia’s PPP market. Through cohesive efforts by the Government of Indonesia and its institutions, the existing challenges in the project were mitigated, and the project was made bankable. SOURCE OF PROJECT PREPARATORY FINANCING PDF through the MoF
SUPPORT AGENCIES PT IIGF, PT SMI, KPPIP
* Estimated Exchange Rate: IDR 1 = US $0.00007 (as of December 2018)
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Commitment from a strong project champion Feb-11 Market sounding can help to mitigate challenges and streamline July-11 Pre-qualification tender the decision-making process. followed by consultations with The most critical challenge being faced by the prospective bidders Umbulan Water Supply System project was coordination amongst its many stakeholders, Aug-11 Announcement of especially considering that the project’s geographical pre-qualification result coverage includes five different regencies and cities Nov-11 Assignment to PT SMI for project in the province. Compounding the coordination issues development support were the externalities to which the project was subject – accommodating lower tariffs to make clean water Feb 12 – Issuance of bidding document and affordable to the users, managing poor financial Sep 15 amendment(s) conditions, a lack of capacity in regional entities to Designing of project structure plan and manage such a project, lack of an adequate Project feasibility studies by PT SMI regulatory framework, and no prior experience of PPP projects in the water sector, to name a few. Feb-13 Submission of application for guarantee to IIGF Addressing these roadblocks required the presence of a strong project champion, which was provided Feb-16 Bid award through KPPIP, once the project was designated as a national strategic priority project. Functioning as Jul-16 Signing of contractual documents a debottlenecking facilitator, KPPIP led coordinated (including the guarantee agreement) efforts involving the Ministry of Finance, the Ministry Dec-16 Financial close of Public Works and People’s Housing, PT SMI, the Province of East Java, and the five municipalities. For July-17 Construction commences instance, the issue of increased project costs for the water supply system, which was at a stalemate, was Mid 2019 Estimated commercial resolved through the enactment of a contract, wherein operations date the central, provincial and district governments agreed to share the increased costs of installing the system.
2. Supporting mechanisms through government institutions help to make the project feasible, bankable and fiscally acceptable. The Umbulan Water Supply System project serves as a flagship project to demonstrate how support from Indonesia’s institutional framework led to the successful commencement of project construction.
Recognising the limited capacity of the GCA to undertake project preparation activities that could meet the standards of the investor community, PT SMI was tasked with supporting the preparation of the OBC and FBC stages. The results of the feasibility study were then ‘road tested’ by PT SMI, with international financial institutions to identify and address residual issues. PT SMI later also partnered with the IFC to function as a transaction advisor.
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The MoF provided funding for project preparation 4. Responding to market feedback to enhance through the PDF, along with supporting the project the attractiveness and marketability of the project. feasibility process through the provision of viability Under the initial project structure, the bidding process gap funding. was carried out between 1988 and 1999, wherein The IIGF, mandated to evaluate the project for the three bidders were shortlisted. However, the project provision of a government guarantee, also provided did not achieve financial closure due to inadequate assistance with finalising the PPP scheme and financial feasibility. Responding to feedback from technical design, undertaking public consultations, the shortlisted bidders and the investor community, and assistance to execute contractual agreements the Government of Indonesia approved government between the various stakeholders. IIGF also fiscal support, through a VGF scheme and the IIGF worked closely with the GCA to formulate a joint guarantee, to make the project financially viable. risk mitigation plan, factoring in environmental Consequently, prior to its procurement in 2011, implications, which was implemented in 2017. the project proponents also conducted one-on-one consultations with prospective bidders. The Ministry of Public Works and Housing (PUPR) was also involved in the planning and preparation of the feasibility study and the contractual arrangements between the water supplier and the municipal water companies (PDAMs).
3. Augmenting and streamlining GCA capacity to prepare projects through the use of international consultants and advisors. To address the lack of capacity within the GCAs to prepare project feasibility studies at par with global standards, the project proponents and PT SMI involved a panel of international and national advisors to strengthen the business case. With the IFC as its transaction advisor, the project was also supported by Mott MacDonald as the international technical advisor, Norton Rose as the international legal advisor and ABNR Law Firm as the national legal advisor, in addition to other notable local firms and individual experts as reviewers.
Further, the Provincial Government of the East Java Province also established a steering committee and technical team within itself, to work closely with PT SMI and the pool of advisors to prepare the feasibility study. Assistance from the Indonesia Infrastructure Initiative (IndII), a joint cooperation with the Australian Department of Foreign Affairs and Trade (DFAT), was also sought for the feasibility studies conducted in 2009, prior to procurement.10
10 In 2018, the Indonesia-Australia Infrastructure Partnership/ Kemitraan Indonesia Australia Untuk Infrastruktur (KIAT) replaced IndII in providing technical assistance to the Indonesian Government to support infrastructure development (https://www.kiat.or.id/home).
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT APPROVALS ENVIRONMENT AND QUALITY ASSURANCE
Early involvement of multilateral institutions is Clearly defined framework for Fiscal Commitment key to the establishment of an effective enabling and Contingent Liability (FCCL) to facilitate the early environment for project development identification of fiscal risks
The Government of Kenya is introducing a legal The National Treasury of Kenya, in association with and institutional framework, consistent with the World Bank, prepared the FCCL guidelines and international good practice, with the support of technical manual for managing fiscal liability risks multilateral institutions to build an effective enabling in PPPs. The FCCL assessment is undertaken twice environment for project preparation. The World Bank’s during the PPP lifecycle, once at the feasibility stage Infrastructure Finance and PPP (IFPPP) project was and again during the negotiation stage. The tool is instrumental in building upstream support to PPP managed by the Public Debt Management Office institutions and developing an initial pipeline of PPP (PDMO) in the National Treasury. The PDMO also projects. Under the IFPPP project, the Government of publishes periodic updates of FCCL commitments, Kenya created an enabling environment to channel such as quantum and term length, contingent private finance to infrastructure projects (the PPP liabilities classified by category or sector, the reasons Act 2013 and the PPP guidelines). While multilateral for undertaking contingent liabilities in the Annual assistance has facilitated creation of a favourable Debt Report, and the Medium-Term Debt Management enabling environment and improved public sector Strategy. The government’s recent initiatives to capacity, consistent and targeted efforts are still strengthen the FCCL Framework represent a strong required to yield sustainable outcomes. appreciation of the impact of the fiscal risks of PPP projects, especially in lower and lower-middle income economies. PUBLIC SECTOR CAPACITY FOR PROJECT PREPARATION
Dedicated team within the Government Contracting Authority (GCA) to support project planning and preparation
Recognising the gap in the internal capacity of the GCAs, the Government of Kenya established dedicated PPP nodes within each GCA to drive broader PPP agenda planning, preparation, and implementation of PPP projects, and the coordination of funds for project preparation. The PPP node brings in external expertise, as well as strong project ownership within the GCA (each member of the PPP node is of the same rank as a head of department). The GCA also establishes a dedicated project appraisal team during the project appraisal and planning stage, which includes a member of the central PPP Unit.
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2. Snapshot of project preparation activities
Kenya is one of the largest and fastest growing preparation by a range of institutions in providing economies in Africa, and it transitioned to a lower- project guidance, capacity building, project review and middle income economy1 in 2014. approval, and project marketing.
Kenya has embarked on a sustained campaign to At the federal level, the National Treasury (NT) serves scale up its infrastructure to meet its mission of as the apex agency for project preparation. The NT becoming an upper-middle income economy, as per provides guidance on project planning, provides its long-term development plan – “Vision 2030”. To independent review and approval of federally funded meet the objectives of this plan, the government has projects, and manages the fiscal implications of a undertaken a series of reforms aimed at improving project. The NT championed the preparation process institutional capacity, empowering sub-national of Vision 2030, which sets out the long-term strategic governments, diversifying project finance and direction for infrastructure in Kenya and the outcomes continuously strengthening the enabling framework envisaged. The NT is also responsible for the overall for project preparation and implementation. monitoring of projects and the medium-term plans of the line departments. In the case of PPP projects, Some of the major reform actions over the past the NT, through the Cabinet Secretary for Finance, decade include the 2010 Constitution of Kenya, which oversees the operation of the PPP Unit (housed within created a decentralised system of governance, the the NT) and PPP Committee. The National and County PPP Act 2013 and the PPP regulations for national Treasuries are also allocated the task of reviewing and sub-national governments, and the recent Draft project concept notes up to a certain threshold, Public Investment Management (PIM) Guidelines approving the feasibility study, and including the of 2018, which promote efficiency in project project in the pipeline for national and country level preparation and review. The 2010 Constitution of projects, respectively. As the main agency responsible Kenya introduced a devolved system of government for the management of public debt, guarantees aimed at better service delivery and started a and financial obligations at the federal level, the NT systematic process of strengthening the capacity continuously monitors the fiscal risk associated with of sub-national governments to plan and deliver PPP projects. infrastructure. The reform initiatives facilitated a surge in infrastructure investment, as well as greater private While the GCAs and the NT form the key institutions sector participation in projects. As per the Global in public infrastructure project preparation, the Infrastructure Hub’s InfraCompass2, total investment institutional structure is more diverse for PPP projects. in the infrastructure sector in Kenya for the period Under the PPP Act 2013 and the PPP regulations, the 2011-2015 stood at US $20.376 billion, with US $2.946 government has established a separate central PPP billion (14% of total investment) contributed by the Unit within the NT to drive PPP project and program private sector. preparation and implementation, and a PPP Committee to review and grant approval for PPP projects. The PPP INSTITUTIONAL FRAMEWORK Committee is an inter-ministerial committee chaired by the NT, responsible for PPP policy formulation, Project preparation activities at the national level project approvals, monitoring and evaluation. The PPP are led by relevant sector ministries and agencies, Committee includes members from the line ministries, and at the sub-national level by the relevant county the Attorney General’s office, and four independent departments and their agencies, referred to as members appointed by the Cabinet Secretary. The the Government Contracting Authorities (GCAs) central PPP Unit, established as a specialised unit henceforth. The GCAs are required to set up a PPP within the NT, serves as the secretariat and technical node, which is a dedicated team formed within the arm of the PPP Committee and oversees the country’s GCA, headed by an Accounting Officer (AO), to aid with PPP program. The PPP Unit was also strengthened the planning, preparation and implementation of PPP through the secondment of international experts with projects. The PPP node also coordinates with external an established track record in managing PPP programs. stakeholders, such as multilateral development banks (MDBs), and is involved in the promotion of projects. The Government of Kenya has also created capacity The GCAs are assisted at each stage of project at the GCA level with the establishment of a PPP node, and a project appraisal team within the GCAs to support and complement the internal capacity of 1 World Bank country classification GCAs in project preparation. The project appraisal 2 https://infracompass.gihub.org/
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teams are dynamic teams formed for each project to feasibility and feasibility studies. The PPP node follows undertake the appraisal of the specific project. The a dynamic structure, wherein the team membership is GCA also requests the central PPP Unit to nominate a revamped according to the needs and priorities of the representative for the project appraisal team to assist projects. To ensure accountability at the highest level in project preparation. The project appraisal team within the GCA, each member of a node, except for assists the GCA project nodes in the preparation of the accounting officer, is of the same rank as a head project studies, such as project concept notes, pre- of department.
LEVERAGING MULTILATERAL ASSISTANCE • support the activities of the PPP Unit in the TO STRENGTHEN THE PPP ENABLING delivery of its mandate; ENVIRONMENT IN KENYA • extend viability gap funding to PPP projects; The Government of Kenya collaborated with and the World Bank in February 2013 under the Infrastructure Finance Public-Private Partnerships • provide a source of liquidity to meet any (IFPPP) project to work towards the establishment contingent liabilities arising from a PPP project of a stable, predictable and transparent investment The World Bank has also developed a detailed environment, along with a pipeline of finance- operational manual for the fund. worthy projects. The US $40 million program is aimed at three key areas of development: i) enabling iii) FCCL Management Framework – The Public environment; ii) project pipeline; and iii) project Debt Management Office (PDMO), a department financing. As of September 20183, the program within the National Treasury, manages a progressive is supporting more than 71 projects at various two-stage Fiscal Commitment and Contingent stages of development. Key program outcomes Liabilities (FCCL) Framework, which is built on are summarised below: both quantitative and qualitative (option pricing model and Monte Carlo Simulation6) methodologies i) Institutional reform and capacity building support to evaluate risks arising from PPPs. The FCCL – After the enactment of the PPP Law in 2013, the assessment is undertaken in two stages: i) feasibility IFPPP established well-functioning PPP institutions stage to review risk allocation, affordability and by strengthening the central PPP Unit and creating sustainability; and ii) negotiation stage prior to 4 more than 57 PPP nodes . Under the IFPPP project, contract award to review the variation in risks hands-on, skill-based and project-based training was between GCA estimates and market feedback. The offered to strengthen the capacity of the PPP Unit PDMO is required to publish all PPP FCCLs in the staff and the project teams. Separate programs were Annual Debt Report and the Medium-Term Debt conducted for a select group of officials under the Management Strategy. APMG’s PPP Certification Program5. iv) Transparency and disclosure – The program ii) Dedicated facility for project preparation – has strengthened the enabling environment by The government established a separate project emphasising the development of transparency and development fund – the Project Facilitation Fund disclosure practices. The PPP disclosure portal (PFF) – to support project preparatory studies for provides considerable literature on the existing PPP projects. The PFF was established as a multi- PPP processes and all non-confidential information purpose fund to provide financial assistance to: related to PPP projects. The PPP Unit is mandated • support GCAs in the preparation, appraisal and to act as a central repository of PPP projects and tendering phases of their PPP projects; undertake continuous monitoring and comparative assessment (ranking) of PPP projects.
5 The APMG PPP Certification Program is an initiative of the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB), the Islamic Development Bank (IsDB), the Multilateral Investment Fund (MIF), the World Bank Group 3 PPP Program status report, PPP Unit Kenya https://pppunit.go.ke/ and the Public-Private Infrastructure Advisory Facility (PPIAF), wp-content/uploads/2018/10/Kenya-PPP-Pipeline-Status-Report- to provide infrastructure practitioners with a definitive credential September-2018.pdf demonstrating alignment with international PPP good practice. 4 As of June 2017, https://www.gtai.de/GTAI/Content/DE/Trade/ 6 The Monte Carlo Simulation is a technique used to understand Fachdaten/PRO/2017/07/Anlagen/PRO201707075012.pdf?v=1 the impact of risk and uncertainty in financial, project management, cost, and other forecasting models.
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PROJECT PREPARATION LANDSCAPE During the feasibility stage, the project appraisal team Project preparation activities are decentralised in of the GCAs are responsible for project feasibility Kenya, with the line ministries and their agencies and studies, with the assistance of external transaction departments responsible for project preparation at advisors. The feasibility stage requires detailed both the federal and sub-national level. The steps in assessments of socioeconomic impact, financial project preparation vary between PPPs (guided by viability or bankability, affordability, market and the PPP Act 2013) and publicly financed projects. risk identification. The PPP projects are assessed A snapshot of the existing project preparation and approved, hierarchically, by the PPP Unit, the landscape is summarised below: PPP Committee and the National Cabinet. The feasibility report is submitted to the PPP Unit for Project conceptualisation and planning. The project approval. The PPP Unit submits the feasibility report identification and planning framework in Kenya is to the PDMO within the National Treasury for FCCL guided by a hierarchical planning process managed approval. The National Treasury, through its PDMO by the National Treasury (NT). At the federal level, the division, conducts an assessment of fiscal risk and NT prepared Vision 2030, which sets out long-term contingent liabilities of a project and forwards the development objectives to transform Kenya into “a recommendations to the PPP Committee for its newly-industrialising, middle-income country providing consideration. In the case of state-owned enterprises a high quality of life to all its citizens in a clean and (SOEs), to ensure the quality of projects, the feasibility secure environment”. Vision 2030 is implemented study is reviewed by the Project Committee of that through five-year plans (the current plan is the SOE and approved by the Board. The feasibility study Medium-Term Plan III (2018-2023)), which provide is thereafter submitted to the Cabinet Secretary for medium-term reform actions and a pipeline the line ministry or County Executive Committee of programs and projects to be implemented. member for the relevant county department and The national level plans are complemented by forwarded to the Cabinet Secretary, National Treasury county level plans. or County Executive Committee Member for Finance PPP project preparation. The steps in project for independent review and concurrence. preparation for PPP projects are guided by the PPP Public investment projects. The public investment Act 2013 and the PPP guidelines. After the project projects are largely implemented by the GCAs, conceptualisation stage, the GCAs initiate the which are reviewed and incorporated by the National preparation of project pre-feasibility and feasibility Treasury as part of the budget preparation process. studies. The GCAs submit a list of potential PPP The project concept notes are submitted during projects along with the pre-feasibility report or a the annual budget cycle, which are reviewed by project concept note to the central PPP Unit, which the NT for linkage to national plans and priorities. undertakes independent screening and decides on the Kenya has recently embarked on a comprehensive PPP suitability of the proposal (utilising the standard reform process to strengthen the public investment 7 PPP Screening Tool by the World Bank) to finalise a management framework with the introduction of list of projects amenable to the PPP approach. The the Public Investment Management (PIM) Guidelines approved project pipeline is disclosed in the project 2018 (Draft). disclosure portal and the PPP project pipeline report is available on the PPP Unit’s website.
7 https://pppknowledgelab.org/tools/tools-assess-whether-implement- project-ppp#ppp-screening-tool
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DRAFT PUBLIC INVESTMENT MANAGEMENT of the planning, GCA and finance departments, and (PIM) GUIDELINES – STRENGTHENING THE four expert members (with expertise in the project PUBLIC INFRASTRUCTURE APPRAISAL PROCESS domain). The guidelines also stipulate that the cost of a feasibility study shall not exceed 0.5% of The Draft PIM Guidelines8 have been recently the total project cost and mandate the Accounting developed by the National Treasury of Kenya to Officer to take special permissions from the NT in streamline the use of government resources on case the value exceeds this amount. projects at the national and county level as part of the reform efforts in public finance management. The investment cycle, as reflected in the Draft PIM The PIM Guidelines are expected to play a Guidelines 2018, comprises of a five-stage process: strong role in strengthening the quality of project (i) project identification and planning; (ii) project preparation, especially for the major publicly feasibility and appraisal; (iii) project selection and financed projects. budgeting; (iv) project implementation, monitoring, and evaluation; and (v) project reporting and The existing public investment management system disclosure. The guidelines provide a unified process is constrained by the absence of an effective quality of initiation and preparation of project studies. They assurance framework, leading to sub-optimal project also provide standard templates for concept notes selection and structuring. There are no standard and feasibility reports. Projects go through a multi- manuals or procedures outlined for project studies, stage approval based on the size of investment as appraisal or selection, leading to unstructured follows: appraisal and review processes. The absence of an independent review system further constrains the i) Project cost up to Ksh. 100 million9 – Only project quality of project preparation. Beside environmental concept notes need to be prepared. The concept assessments carried out by the National notes shall be prepared internally by the GCAs and Environment Management Authority (NEMA), there approved by the Project Committee. is no independent review to challenge project design, ii) Projects above Ksh. 100 million – Concept note assumptions, justifications and costing etc. Further, and feasibility reports need to be prepared. The the administrative overheads (associated with concept notes must be reviewed by the NT before the budget preparation process) and information initiating the feasibility stage. The involvement asymmetry severely restrict the capacity of NT to of the NT at the concept stage will improve the act as a gatekeeper in project selection. In some screening process and assure greater project quality, cases, the feasibility studies were conducted after especially in high-value projects. The National and the project had been approved, while in other cases, County Treasuries will be responsible for approving new projects have been misrepresented as ongoing the feasibility report and the inclusion of the project projects to avoid rules which limit new projects. in the pipeline of projects at both the national and To address these challenges in public investment county level. planning, the NT introduced the Public Investment iii) The project shall also be re-appraised in cases Management (PIM) Guidelines 2018 (Draft). The PIM where a project has been in the pipeline for more Guidelines bring in standardised processes (national than three years without budget provision, a change and county level) for the entire project management in project scope, an increase in project cost of more cycle, including planning, identification, feasibility than 25% of the original cost, or force majeure. assessment, approval and budgeting. The guidelines shall be supported by capacity development of the The interventions envisaged under the PIM NT and the GCAs. The NT shall be supported by a Guidelines are expected to strengthen the project dedicated PIM unit to support the monitoring and preparation standards in Kenya. Some of the enforcement of the PIM Guidelines. The GCAs shall immediate outcomes of the guidelines will include be supported by Project Committees (dedicated strengthening the quality of the project pipeline, teams within the GCAs) in undertaking the review mitigating project risks, the standardisation of and appraisal of project preparation documents project preparation processes, improving public (such as project concept notes and feasibility sector capacity (in the GCAs and the NT) to plan and studies), followed by submission and coordination deliver on large-value projects, and strengthening with the NT. The project committee shall include the transparency and accountability for the portfolio following members: head of the GCA, members management of public investment projects.
8 The draft version of the guidelines was uploaded to the National 9 Approximately US $978,000, as of December 2018. Treasury portal for citizen’s comments in September 2018.
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3. Guidance for project preparation
FRAMEWORK FOR THE MANAGEMENT OF FISCAL COMMITMENTS AND CONTINGENT Guidance LIABILITIES (FCCL)
Owner National Treasury of Kenya
Project Project feasibility and appraisal development stage
Details The FCCL Framework was prepared in assistance with the World Bank under the IFPPP project. The FCCL Framework comprises FCCL guidelines and the FCCL technical manual. The FCCL guidelines provide a description of the assessment and approval of FCCLs associated with PPP projects. The FCCL technical manual’s objective is to provide a detailed description of the FCCL Framework and methodologies for quantifying risks, and illustrate the use of the long-term fiscal planning tool and template for the project risk matrix.
Guidance PROJECT DISCLOSURE
Owner PPP Unit, National Treasury of Kenya
Project Project marketing development stage
Details The “Project Disclosure Portal” was launched in 2018 by the Government of Kenya with support from the World Bank, as a push to improve transparency of information on PPP projects. The portal is a digital platform that provides information on multi-sectoral projects at various stages of the PPP lifecycle. It serves as a marketing and stakeholder awareness tool, which provides the rationale for choosing the PPP model as the procurement method, the rationale for unsolicited proposals, scope, project estimated costs, likely sources of revenue and associated project documents. The PPP Unit is responsible for managing the portal.
Link for further details: https://pppunit.go.ke/
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4. Project case example: Nairobi – Nakaru Mau Summit Highway
QUICK FACTS
VALUE (IN US $ MILLION) STATUS Procurement stage – 700 RFP evaluation
PROJECT OWNERSHIP SUPPORT AGENCIES Kenya National Highways KeNHA, Government Authority (KeNHA) of Kenya, Intercontinental Consultants and Technocrats Pvt. Ltd. SOURCE OF PROJECT PREPARATORY FINANCING World Bank funding through the IFPPP project
PROJECT BRIEF The Government of Kenya (GoK) will levy tolls on The Nairobi – Nakuru Mau Summit Highway is users and compensate private players through a brownfield project, involving the expansion availability payments. and improvement of a two-lane road into a The Intercontinental Consultants and Technocrats four-lane dual carriageway from Rironi in Pvt. Ltd. and its consortium were appointed Nairobi to Mau Summit in Nakuru County. as transaction advisors to assist KeNHA in The stretch of road is strategically important to the preparation of the project studies, bid the country and forms part of an international management and financial closure of the corridor connecting land-locked countries, such project. The project has been designed under a as Uganda, Rwanda, Burundi, South Sudan and 30-year Design-Build-Finance-Operate-Maintain- the Democratic Republic of Cargo, to the Port Transfer (DBFOMT) arrangement. The private of Mombasa. Considering that this stretch of concessionaire shall be responsible for the road was amongst the most dangerous roads construction, operation and maintenance of the on the planet (according to the World Health highways, separated into the following segments: Organisation), the project studies aimed to i) widening of 175km of the A8 highway between re-design the highway to improve the safety, Rironi and Mau Summit and turning it into a quality and capacity of the road. four-lane dual carriageway, including operation and The project is being implemented by the maintenance; Ministry of Transport and Infrastructure, ii) strengthening of 58km of the A8-South highway represented by the Kenya National Highway between Rironi and Naivasha, including operation Authority (KeNHA). It is part of the first- and maintenance; and mover PPP program, supported by the Kenya Infrastructure Finance Public-Private iii) operation and maintenance of 12.43 km of Partnership (IFPPP) project, which financed the A8 highway between Gitaru and Rironi. the project studies. Feasibility studies included The concessionaire will be compensated by technical studies, financial feasibility, a KeNHA through availability payments linked to preliminary environmental and social impact performance. The government shall hire a toll assessment, and a resettlement action plan. operator through a separate contract.
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Multilateral assistance was key in the planning 2010 The National Transport Policy and development of the project identified several policy initiatives The project was developed as one of the strategic for the road sector in Kenya roads under the first-mover PPP program for the road sector in Kenya and was supported by the 2012 Kenya Infrastructure Finance World Bank-assisted IFPPP project launched in 2012. Public-Private Partnership The multilateral assistance program has helped: (IFPPP) project launched i) strengthen the enabling environment for project preparation; ii) develop internal public sector capacity; 2013 PPP Act enacted iii) provide project preparatory financing; iv) strengthen the quality assurance standards; and v) facilitate Feb-15 Intercontinental Consultants consultations with investors and private stakeholders. and Technocrats Pvt. Ltd. and The broader objective of the IFPPP project was to its consortium hired as facilitate the establishment of an effective enabling transaction advisors environment for project preparation and identify ways to increase private investment. The PPP Act 2013 Nov-16 Feasibility study approved and and the guidelines developed under the IFPPP project RFQ for the project launched formed the guidance for the transaction advisors, as well as KeNHA, in undertaking the project studies and Feb-17 RFQ submission review. The program also supported the strengthening of internal public sector capacity in KeNHA and the July-17 RFP documents issued PPP Unit through specific hands-on, skill-based and project-based training. The preparatory studies for the April-18 RFP close date project were financed by the World Bank facility, which helped KeNHA to hire quality transaction advisors 2019 Scheduled financial close to undertake the project studies. The World Bank is also playing an important role in engaging with the potential investors to expedite financial close.
2. Project structuring to facilitate the deepening of local financial markets The depth of the financial markets is often cited as an important indicator of the maturity of a PPP market, as well as the quality of the project preparation in a country, especially because of the high-quality standards prescribed by the financial markets. The project was developed as part of a broader objective to draw in long-term finance from local investors to finance the project under the Maximizing Finance for Development (MFD) approach10. Under the approach, the project and broader ongoing engagement aim to promote capital market solutions to crowd-in local financiers into infrastructure PPP projects to create a fiscally sustainable way to finance PPPs.
10 The Maximizing Finance for Development (MFD) approach is the World Bank Group’s approach to systematically leverage all sources of finance, expertise, and solutions to support developing countries’ sustainable growth, in line with the Sustainable Development Goals (SDGs).
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In line with this approach, the project structure and the investors who were consulted flagged concerns preparatory documents included specific incentives associated with the enforcement of toll collections for the provision of local currency financing for the and the general demand risks. To address these project, such as the provision of the availability concerns, the Government of Kenya established a payment model and positive scoring for bidders who multiple level structure for supporting debt repayment: indicate a lower proportion of the availability payment i) a ring-fenced National Toll Fund will be created to indexed to foreign currencies. Additionally, the World collect the tolling revenue from road PPP projects; Bank’s International Development Association (IDA) ii) the deficit between the toll revenue and service Payment Guarantee and possible Loan Guarantee to payments shall be filled by the GoK; and iii) the World backstop the availability payment of the GoK for the Bank’s IDA and payment guarantee. The government project improved the attractiveness of the project to also made it clear that it was committed to levying local institutional investors. the toll on users and no free alternative routes would be offered. 3. Communicating the government’s strong commitment towards the project to the market 4. Standardisation of project preparation processes participants and incorporating their feedback to to rationalise project preparation costs, and use of enhance project bankability parameters for assessing project design options The project received strong commitment from the The Ministry of Transport, Infrastructure, Housing and Government of Kenya, due to the project’s alignment Urban Development, through its first-mover road PPP with the national and sectoral plans, as well as its program, identified five strategic priority road sector categorisation under the first-mover PPP program. projects. One of the objectives for choosing various The government’s strong commitment to the project projects under a single program was to standardise is manifested in the support mechanisms and risk project preparation to enhance public sector capacity management practices promoted under the project and rationalise project preparation costs. Therefore, structure. The central PPP Unit and the project agency all the projects were structured as availability projects (KeNHA) undertook active market engagement with no transfer of revenue risk to the private party. during the feasibility and procurement stages, which Further, a standardised risk allocation and tender helped them identify the key areas of concern with documents were prepared with the necessary respect to project structure and risk allocation. The project-specific variations. inputs received during the early stages, related to During the feasibility stage, the international the technical, financial, key risk allocation and legal consultant undertook a comparative assessment aspects of the project, were also communicated of around twelve alternative alignments through through separate one-on-one Competitive Dialogues subjective parameters including lifecycle cost, (CD) with each bidder during the bidding process. engineering challenges, resettlement impact, Two specific areas of government intervention include environmental sensitivity, and land acquisition need. the management of foreign exchange risk and toll The alignments were given scores based on each of collection risk, which were critical to drive investor the parameters as follows: 0-10: Low; 10-20: Medium; participation. The government provided upfront 20-30: High; and 30-40: Very High. The alignment with support to undertake local currency inflation risk, the maximum aggregate score and that which offers exchange rate risk and local currency interest rate the lowest land acquisition was considered for the risk on the roads PPP projects through the payment final design. mechanism in the concession agreements. Being one of the earliest toll road projects in the country, the project also had substantial toll risks. The local
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1. Noteworthy practices for project preparation
ENABLING ENVIRONMENT FOR PROJECT PROJECT APPROVALS PREPARATION AND QUALITY ASSURANCE
Clearly defined policy framework for government Development and periodic review of quality support, and managing market promotion and assurance tools fiscal risk trade-off in projects Project preparation in the Republic of Korea (Korea) The Government of Korea (GoK) has introduced is aided by a wide array of tools (largely owned by a range of interventions to support private sector PIMAC) that are relevant to each stage of project investment in infrastructure. Key support products preparation. Key tools for project assessment include the Pre-Feasibility Study (PFS), Re-assessment which aid quality project preparation include Study of Feasibility (RSF), Value Engineering (VE) the granting of land expropriation rights to the and Re-assessment of Demand Forecast (RDF). concessionaire, a risk sharing scheme, bonus The tools were strengthened through a evaluation points for unsolicited proposals, and learning-by-doing approach. compensation of the proposal costs of unsuccessful bidders. While there have been cases of excessive VFM check and transparency in managing risk transfer to the government in the past, the GoK unsolicited proposals has been able to evolve through lessons learned to establish clarity and transparency in scheme designs. While unsolicited proposals globally have faced several challenges due to concerns regarding competition and transparency, Korea has been able PUBLIC SECTOR CAPACITY to make reasonable strides, backed by a positive FOR PROJECT PREPARATION policy framework. The Government of Korea initiated Establishment of a specialised entity for the actions to strengthen the unsolicited project proposal independent review of project studies procurement landscape, including a mandatory Value for Money (VFM) assessment for all unsolicited The Government of Korea established the Public and projects (to promote transparency in project selection Private Infrastructure Investment Management Center and early assessment of risks), incentivising the (PIMAC) within the Korea Development Institute (KDI) project proponents during bid evaluation, and to serve as an independent reviewer of project studies compensating the losing bidders for the cost of and advise the line agencies on project implementations. preparing their project bid. PIMAC acts as a gatekeeper for projects, a capacity building agency and a centre of research. PIMAC enhances the efficiency and transparency of public and private investment preparation and procurement, and also provides consulting services and research to improve related policies and analytical tools.
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2. Snapshot of project preparation activities
The Republic of Korea (Korea) is considered a initiation of the Private Participation in Infrastructure pioneer in implementing institutional and process (PPI) program by the Korean Government under reforms to improve the quality of project preparation. the Promotion of Private Capital in Social Overhead Capital Investment Act. However, the program Korea’s focus on project preparation has evolved achieved limited success, especially with the onset since the Asian financial crisis of 1997, with greater of the Asian financial crisis of 1997. The second impetus laid on strengthening public investment phase of PPPs in 1999 and the third phase in 2005 management processes. Korea has a long history of were more successful, with a considerable number private participation in infrastructure starting in the of projects executed as PPPs, especially in the social late 1960s. The early period of private investment infrastructure and transport sectors. The evolution of (1968 to 1994) was characterised by largely piecemeal Korea’s PPP framework demonstrates the importance interventions, which supported about 93 projects of maintaining a balance between investor demand costing US $2.7 billion in private investment. The first and fiscal discipline. major phase of PPPs in Korea started in 1994 with the
EVOLUTION OF INFRASTRUCTURE INVESTMENT separate Pre-Feasibility Study (PFS) undertaken by MANAGEMENT IN KOREA the Public Investment Management Center (PIMA) Although Korea has sought to put in place for large projects be made mandatory. In addition, institutions to manage infrastructure investments a new PPP law, ‘The Act on Private Participation since the mid-1970s, including the creation of the in Infrastructure’, was adopted. The Private now obsolete Economic Planning Board (EPB) Infrastructure Investment Center of Korea (PICKO), for investment planning and the Deliberative was created to provide project preparation support, Committee (IPDC) for investment reviews, the including the preparation of feasibility studies, major transformational reforms happened in project reviews, and evaluation. While PICKO was 1994, with the introduction of the Total Project focused on reviving private sector investment, Cost Management (TPCM) system and the Private PIMA was created to ensure quality control Capital Inducement Act (PPP Act). Under TPCM, the and independent reviews for large public Ministry of Economy and Finance (MOEF) closely investment projects. monitors expenditure on large-scale projects. Momentum in the development of infrastructure However, the introduction of the PPP Act did not picked up further post-2005, following a second translate into large investments, owing to limited amendment to the PPP Act. PICKO and PIMA were risk evaluation, lack of government support, limited merged to form the Public and Private Infrastructure staff experience, inadequate process rigour and Investment Management Center (PIMAC) under limited budgets. this Act. Since then, the PPI Act 2005 and the PPI Following the Asian financial crisis, the Korean Act Enforcement Decree 2005 have provided the Government introduced a slew of measures (in overarching legal framework for both public and 1999) to improve the public budgeting system private infrastructure investments. The PPP Basic and removed some of the constraints to the PPP Plan and the PPP Implementation Guidelines model. Accordingly, the Enforcement Decree of provide the framework for project preparation and the Budget and Accounts Act established that a implementation.
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INSTITUTIONAL FRAMEWORK PROJECT PREPARATION LANDSCAPE The Republic of Korea has a unified framework A snapshot of the project preparatory landscape in for the project preparation of public and private Korea is summarised below: projects. Project preparation takes place largely in Project conceptualisation and planning. At the the respective line ministries, with the Ministry of beginning of every year, line departments prepare a Economy and Finance (MOEF) acting as the apex medium-term (five-year) project plan, based on which institution for infrastructure preparation. The Public MOEF finalises its National Fiscal Management and Private Infrastructure Investment Management Plan (NFMP). The NFMP serves as the planning Center (an affiliate of the Korea Development and fiscal management reference document for line Institute (KDI)) serves as a think-tank and capacity departments to prepare their respective annual budget development agency providing technical support plans. NFMP 2017-2021 envisages an aggregate and guidance for line departments and the MOEF in expenditure of KRW 2270 trillion (US $2 trillion), with managing project preparation, procurement government spending on infrastructure estimated at and implementation. KRW 16-20 trillion (US $14-18 billion). Under the PPP Act, a PPP Review Committee (PRC) Project feasibility studies and structuring. This stage is organised and managed by the MOEF. The PRC may involve multiple agencies, depending on the considers matters concerning the establishment nature of project assistance. While feasibility studies of major PPP policies and key decisions in the are managed largely by the line departments, PIMAC implementation of large-scale PPP projects. The PRC plays a significant role in the case of PPP projects is composed of the Minister of Economy and Finance and preparatory studies for large projects. In the (chair), vice ministers of the line ministries in charge of case of large projects1, MOEF approval is required implementing PPP projects, and private sector experts before initiating the feasibility study. This MOEF with knowledge and experience in PPP projects. approval is based on the recommendation of the Pre- Feasibility Study (PFS) report by PIMAC. In the case of a PPP project, PIMAC undertakes an independent assessment of the line department feasibility studies through a Value for Money (VFM) assessment. Based on the VFM assessment results, MOEF and PIMAC suggest alternate financing models for maximising benefits. Between 1999 and 2017, PIMAC conducted VFM tests for more than 526 projects and the PFS test for 685 projects.
1 Projects where the total project cost is more than KRW 50 billion (US $44 million) and which require central assistance of more than KRW 30 billion (US $27 million).
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Project appraisal and review. The project appraisal and • Pre-Feasibility Studies (PFS) for large-scale projects review follow distinct paths under a unified framework were introduced in 1999 and formalised in 2006 for PPPs versus public sector projects. The case for to improve rigour in project preparation. To be implementing a unified framework has been built completed within a timeframe of six months, the based on the successful experiences of the United PFS assigns analytical hierarchy process (AHP) Kingdom (UK) and Australia. The project selection and weights to different facets: Economic analysis structuring of PPPs or projects procured traditionally (35-50%), policy analysis (25-40%), and balanced are determined by the VFM considerations under regional development (25-35%). If the AHP score each model. In this regard, the Government of Korea is ≥ 0.5, a project is appraised as feasible. The established a unified and transparent framework independent review process, with clear and for project appraisal based on the independent transparent assessment criteria, has helped in the assessments undertaken by PIMAC. The objective of early identification of unviable proposals and has led the study is to compare the VFM levels across both to significant cost savings. Between 1994 and 1998, procurement options and select the one with the better 32 of 33 large projects were approved as feasible. value for money. The assessment also helps in the Following the introduction of the PFS and stringent early identification of risks, leading to better project guardrails, 434 of the 685 projects reviewed by structuring. In the case of solicited projects using public PIMAC were deemed feasible. The process is financing, these are part of the budget plan of the line estimated to have enabled budgetary savings of department, subject to approval from MOEF. In the KRW 141 trillion (US $101 billion) to 2017. case of solicited projects using the PPP model, project approval is provided by the PPP Review Committee • Value For Money assessment – The Competent (PRC), chaired by MOEF, where the project size is Authority uses VFM assessment reports as the greater than KRW 200 billion (US $178 million) or the basis to make a judgement on whether to move central government subsidy exceeds KRW 30 billion forward with the PPP project. The VFM assessment (US $27 million). In other cases, the line departments is strongly controlled by PIMAC and supports approve the project and notify MOEF and PIMAC. Under decision-making at three stages: (i) decision to the unified framework, PIMAC supports Government invest; (ii) decision to implement by PPP; and (iii) Contracting Authorities (GCAs) in two phases: (a) the formulation of a PPP alternative to present a best decision to proceed (outcome of the Pre-Feasibility practice for implementation. The VFM assessment Study); and (b) the decision to implement, including the reports are an important input for the tender choice of PPP versus public investment (according to evaluation and in negotiations. the outcome of the VFM assessment). Financing project preparation. Project preparatory activities for public and private projects are largely financed by budgetary allocations at the central and sub-national level. In the case of unsolicited projects using PPP financing, the project plan is prepared by the private sector, while the project review is undertaken by PIMAC.
PIMAC – BUILDING QUALITY AND RIGOUR IN process reflects a process of continuous learning. PROJECT PREPARATION Created to enable comprehensive and systematic The project preparation landscape in Korea has management of both traditional public investment historically been the responsibility of individual and PPPs, MOEF has progressively adopted tools line ministries and the relevant agencies. The to strengthen quality assurance standards: Total absence of an independent review process with Project Cost Management (TPCM) in 1994, the clear and transparent assessment criteria led Pre-Feasibility Study (PFS), Re-assessment Study to a considerable drain on resources due to of Feasibility (RSF) and Performance Evaluation unviable proposals. It is within this context that (PE) in 1999 (post Asian financial crisis), Value the Government of Korea established PIMAC as Engineering (VE) in 2000, and the Re-assessment a gatekeeper for the independent assessment of of Demand Forecast (RDF) in 2006. projects. MOEF’s role in the project preparation continued...
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During this process, PIMAC has supported MOEF • Stakeholder engagement in project development: by providing rigorous research on enhancing PIMAC’s PFS studies are guided by a transparent methodologies and tools for quality assurance stakeholder engagement process and follow standards and conducting project appraisals a ‘Five Meeting Rule’. The Five Meeting Rule including PFS, RSF, and RDF on large-scale includes: i) a Progress Check meeting; ii) a KDI 1st infrastructure processes. The tools were updated Check meeting; iii) a MOEF 1st Check meeting; periodically by incorporating lessons learned and iv) a KDI 2nd Check meeting; and v) a MOEF 2nd best practices from project cases. Check meeting. The review includes participation by the MOEF, line departments, PIMAC and field PIMAC is organised along three divisions, namely: specialists from the private and public sector. (i) the public investment division, which conducts and manages PFS, supports policy research on • Mapping guidelines for preparatory activities: public investment management, and manages PIMAC has formulated guidelines for all major the Reassessment Study of Feasibility (RSF); (ii) project appraisal and approval processes, the public-private partnerships division, which including feasibility and VFM test guidelines, formulates PPP Annual Plans and develops PPP preparation of Request for Proposals (RfP), guidelines, conducts evaluations of PPP projects, tender evaluation, Build Transfer Lease (BTL) undertakes research on PPPs, and supports the project management etc. In a bid to standardise financing and refinancing of PPPs; and (iii) the output quality, PIMAC has also prepared policy and research division, which supports standard output specifications by facility research on project evaluation methodology, (school, military housing, and integrated school and undertakes capacity building and training, facilities), and standard guidelines for PFS in international relations, infrastructure database general, for the road and railway sectors. management, state-owned enterprise (SOE) project • Risk allocation frameworks and cost management: appraisal, and assessment of tax expenditure PIMAC has revised risk-sharing mechanisms, projects. incorporating lessons from the former Minimum MOEF and PIMAC have spearheaded the Revenue Guarantee scheme, to enhance private implementation of multiple policy and process interest while rationalising government support. interventions to improve the quality of project PIMAC also undertakes resource (cost and time) preparation and thereby reduce wasteful reviews for large projects at each stage of the expenditure, including the following: project lifecycle under its Total Project Cost Management framework. • Independent review process for project approval: PIMAC provides an independent review for • Capacity building program: PIMAC offers periodic project preparation by conducting various capacity building programs for line ministries, studies and evaluations, including the PFS, RSF, local government officials and technical staff. RDF and feasibility study and VFM analysis for This includes domestic programs sponsored by PPP projects. While the PFS provides an initial PIMAC and the MOEF and global programs by filter for project selection, the RSF and RDF multilateral agencies, and is aimed at inculcating reformulate and independently check outcomes best practices from PPP processes globally. of feasibility studies and demand forecasts. The efficacy of Korea’s policy framework and PIMAC assembles a multi-disciplinary expert project preparation processes is reflected in its team, along with its in-house staff, for these infrastructure delivery outcomes. From 1999 evaluations. The review leverages PIMAC’s to 2017, a total of 712 PPP projects have been multi-sectoral internal know-how and brings initiated and the total investment amount of PPP in expertise from external experts, including projects was recorded at KRW 108 trillion (US $66 university professors (such as for transportation billion). demand analysis), and private engineering firms (for cost estimation).
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3. Guidance for project preparation
Guidance GENERAL GUIDELINES FOR PRELIMINARY FEASIBILITY STUDIES
Owner MOEF
Project Project pre-feasibility stage development stage
Details The “General Guidelines for Preliminary Feasibility Studies” (hereinafter “General Guidelines”) have served as a basic manual for conducting all preliminary feasibility studies and include the methods and standards for doing so. They comprehensively suggest theoretical and practical ground rules concerning the evaluation of public investment projects. They also serve as a basic manual for standard guidelines in studies on different sectors, such as roads, railroads, ports, culture and tourism, and water resources. Originally studied and established by KDI PIMAC, these guidelines have been owned and managed by MOEF since 2017.
Link for further details: https://www.kdi.re.kr/kdi_eng/kdicenter/general_guidelines_for_pfs.pdf http://www.law.go.kr/admRulSc.do?tabMenuId=tab107#liBgcolor12 (in Korean)
Guidance SECTOR-SPECIFIC GUIDANCE ON PRE-FEASIBILITY STUDIES
Owner KDI PIMAC
Project Project pre-feasibility stage development stage
Details PIMAC, which leads the preparation of pre-feasibility studies in Korea, has prepared sector-specific guidelines for the preparation of pre-feasibility studies in accordance with the General Guidelines for Preliminary Feasibility Studies. It examines the efficiency and appropriateness of a project by reviewing its economic and policy feasibility, as well as investment priorities and optimal investment timing, amongst others. The sectoral coverage is fairly diverse and includes culture and tourism, airports, ICT, medical facilities, roads, railways, ports, dams, and water.
The role of PIMAC in Preliminary Feasibility Studies also includes the development and revision of policies and methodologies, as well as the construction of the PFS database.
Link for further details: http://pimac.kdi.re.kr/guide/rguide_list.jsp
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Guidance RE-ASSESSMENT STUDY OF FEASIBILITY
Owner MOEF
Project Project studies and during implementation development stage
Details The Re-assessment Study of Feasibility (RSF) is undertaken for projects which have utilised higher than expected cost or time resources, leading to concerns over the validity of the original feasibility study. While the RSF is generally initiated for projects which are in the implementation stage, there are instances when the RSF may be conducted during the preparation stage as well (mainly due to the delay between the finalisation of the PFS/ feasibility study and project approval).
The purpose of the RSF is to prevent budget waste and to improve fiscal management efficiency by transparent and fair decision-making through the objective and neutral investigation of the validity of a large-scale government project.
Link for further details: http://pimac.kdi.re.kr/guide/vguide_list.jsp http://www.law.go.kr/admRulSc.do?tabMenuId=tab107#liBgcolor1 (in Korean)
Guidance GUIDELINES FOR TOTAL PROJECT COST MANAGEMENT (TPCM)
Owner MOEF
Project Project studies and approval development stage
Details The purpose of these guidelines is to enhance the efficiency of fiscal spending by reasonably adjusting and managing, by each project phase, total project costs of large projects funded with the national budget or funds under Article 50 of the National Finance Act and Articles 21 and 22 of the Enforcement Decree of the same Act.
The term “total project cost” in these guidelines means all costs and expenses during the lifecycle of the project. The TPCM guidelines cover the following phases: Phase I – Project Conception Phase II – Preliminary Feasibility Study Phase III – Feasibility Study and Establishment of Basic Plan Phase IV – Basic Designing Phase V – Engineering Design Phase VI – Awarding and Execution of Contracts Phase VII – Construction
The guidelines include general directions on each of the project assessment tools utilised by line GCAs and/or PIMAC, including PFS, RSF, and RDF.
Link for further details: https://www.kdi.re.kr/kdi_eng/kdicenter/guidelines_for_tpcm.pdf http://www.law.go.kr/admRulSc.do?tabMenuId=tab107#liBgcolor1 (in Korean)
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4. Project case example: Seoul – Jemulpo Tunnel
PROJECT BRIEF QUICK FACTS The Seoul-Jemulpo tunnel project is a 7.53 km- long road tunnel project implemented on a Build- Transfer-Operate (BTO) basis below Jemulpo VALUE (IN US $ MILLION) Road, which starts at the Shinwoel Interchange in Seoul. The existing road stretch was constrained 400 by limited space for road widening, which led to environmental concerns, and high fuel wastage, adding to the overall strain on the city’s economy.
The Seoul Metropolitan Government (SMG) is responsible as a competent authority for this US $400 million2 project. The project concessionaire STATUS was selected through a competitive bidding Under construction process. A special purpose vehicle (SPV), Seoul Tunnel Company Limited and others. The project concessionaire was a consortium led by Daelim Industrial Company Limited and others. The proposed tunnel, strategically located in a high- density corridor connecting major cities like Seoul, PROJECT OWNERSHIP Incheon and Gyeonggi, was expected to serve more than 60,000 cars while cutting down travel Seoul Metropolitan time. The tunnel project will enable the previous Government; congested motorway route to be transformed into a more eco-friendly space which is more Seoul Tunnel accessible to local residents, and includes two to four traffic lanes, parks and bicycle routes. Company Limited The project shall also include the provision of exclusive green spaces and incorporate neo- urban designs to facilitate placemaking3.
The project was initiated by an unsolicited proposal in 2007 from the private sector to build SOURCE OF PROJECT the underground tunnel. A consortium, led by PREPARATORY FINANCING Daelim Industrial Co., Ltd., was chosen as the preferred bidder for negotiations in 2011 after Primarily private sector obtaining the necessary administrative approvals. (unsolicited proposal) The project is under construction and will be opened to traffic in 2020.
SUPPORT AGENCIES KDI PIMAC
2 The project cost was KRW 455 billion; Exchange rate considered is 1 KRW = US $0.00089 as of 7 December 2018
3 Placemaking is a multi-faceted approach to the planning, design and management of public spaces.
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION
1. Establish transparent procedures to facilitate Jul-07 Project studies submitted by unsolicited proposals in BTO projects private player Korea follows a unified framework for project preparation, with solicited and unsolicited proposals 2008 Value For Money tests undertaken reviewed independently by PIMAC. This helps with by KDI PIMAC adherence to expenditure controls and ensures that the full life costs of PPP projects are taken into account at the project approval stage. Learning from Jan-11 Notice for Proposal announcement the fiscal challenges arising out of the Minimum Revenue Guarantee scheme, the government 2011 Selection of preferred bidder for introduced rules mandating the preparation of negotiations feasibility studies for unsolicited proposal projects. The project preparation of the Seoul-Jemulpo Tunnel project passed through multiple review stages. 2012 Negotiations for concession agreement Following submission of the project proposal, PIMAC by KDI PIMAC conducted a VFM assessment, undertaken in 2008. As part of the VFM assessment, PIMAC reviewed 2014 Signing of concession agreement the cost-benefit analysis of the project, potential government payments, and comparison of the PPP route vis-à-vis public sector financing. Based on the 2015 Approval of detailed implementation results of the VFM test, the competent authority plan and design including (the Seoul Metropolitan Government) undertook the Environmental Impact decision to move forward with the project as a PPP. Assessment (EIA) 2. Clearly define roles for project stakeholders 2020 Expected completion of project Korea has established well-defined roles for each stakeholder in the project preparation stage. The key project preparation stakeholders in the Seoul-Jemulpo Tunnel project include the project proponent (private company), the project owner (the Seoul Metropolitan Government), the apex agency (the MOEF), an independent reviewer (PIMAC) and the Ministry of Environment (for the Environmental Impact Assessment). The steps in project preparation were as follows:
• Preparation of project studies by the project proponent; • Submission of project studies to the project owner/ competent authority; • Project owner, through the MOEF, requested PIMAC to initiate the Value For Money assessment; • Results of the VFM assessment and specific recommendation on the project structure (including implementation as a PPP) shared with the MOEF and project owner; • Announcement of RFPs by the competent authority assisted by PIMAC;
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• Selection of preferred bidder and negotiations with The second stage evaluation is a multi-criteria the bidder by PIMAC; evaluation with weightings for:
• Finalisation of the concessionaire and contract • the construction plan (210 points); award; and • operational plan (160 points);
• Application and approval of detailed • traffic model assessment (150 points); implementation plan by the project owner/ competent authority. • creativity in planning and citizen engagement (80 points); The sequence of project preparation steps indicates clearly demarcated roles for each stakeholder and • proposed toll levels (200 points); and project disclosure at each stage, which contributed to • government subsidy required (200 points) – the overall efficiency and transparency of the project. for a total of 1000 points.
3. Incentivise the unsolicited project proponent The Seoul Metropolitan Government was supported by during project implementation a dedicated team to benchmark global best practices in construction management and comparisons of Korea has established an innovative mechanism evaluation criteria, scope of work, fee structures, to incentivise the project proponent in the case of team organisation, scoring of proposals, quality unsolicited project proposals. Under this mechanism, management, safety programs and site supervision there is specific weighting for project proponents practices. The multi criterion evaluation methodology using bid evaluation criteria. According to the existing and the phased approach undertaken by the practices, the USP proponent can receive a bonus stakeholders were important inputs to strengthening of up to 10% (of the total evaluation points) if the the Detailed Engineering and Design Plan for proposal is not amended by the public agency, and a Implementation (DEDPI). bonus of up to 5% (of the total evaluation points) if the proposal is amended by the public agency. The level of Following the execution of the concession agreement bonus points shall be decided during the VFM stage. in 2014, the private and public stakeholders collaborated to strengthen the design, environmental For this project, the project proponent was awarded assessments and the citizen engagement processes. a preferential score of 0.5% of total points (50 points While the timing of this collaboration may not be an in the 1000-point evaluation scale). Additionally, the ideal preparatory practice, especially with the risks project proponent was also given a pass-through associated with environmental approvals, it led to the in the first stage of evaluation and automatically unintended benefit of greater ownership of the private shortlisted for the technical and financial evaluation at player and reduced time between the approval of the the second stage. DEDPI and construction. 4. Maintain independence in project evaluation 5. Innovative citizen engagement methods to through the bid process improve project branding and equity The Seoul Metropolitan Government initiated a With the implementation of the underground tunnel, Request for Proposal to allow third party bidders to the Seoul Metropolitan Government (SMG) initiated an submit their proposals for the project, which brought innovative idea to transform the existing expressway transparency to the procurement process, as well as into an eco-friendly space for citizens. The idea was a fresh perspective to design and implementation. promoted by the SMG in the Seoul Urban Design Proposals were strongly evaluated on the technical competition in 2013 under the theme “Towards Urban capabilities of the bidders. The bidders’ perspective Integration”. For the competition, the SMG requested on the preparatory documents were sought and design proposals from the citizens on the eco-friendly incorporated into the final design and implementation regeneration of the expressway, Jemulpo-gil, and plan. The proposal evaluation was undertaken across the adjacent blocks in the west region of Seoul. The two phases – Phase 1 (Pre-qualification) and Phase 2 initiative helped to discover innovative elements in (Detailed evaluation). During Phase 1, the bidders were the project design, and also generated favourable reviewed to ensure basic technical qualifications and brand equity for the project and its impact on the adherence to the rules stated in the bid documents. environment.
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1. Noteworthy practices for project preparation
PUBLIC SECTOR CAPACITY PROJECT PREPARATION FOR PROJECT PREPARATION FINANCING
Programmatic approach to project planning Establishment of the National Infrastructure Fund and implementation (FONADIN) to support infrastructure financing, preparation and implementation Mexico promotes a programmatic planning approach, which has helped to create quality in institutions, The role of FONADIN in providing a strong enabling processes, and financing of infrastructure projects, environment for project preparation in Mexico is especially in the core sectors of energy and transport. catalytic. Its functions include coordinating the identification of infrastructure needs and project PROJECT IDENTIFICATION pipelines, providing advisors to structure projects, AND CONCEPT DEFINITION project preparation facility support for studies, independent appraisal of feasibility studies and National plans supported by formal agreements for arms-length decision-making. FONADIN focuses on national government–local government coordination PPPs in highways, ports, airports, the environment, urban mass transportation, water and tourism. The “Agreements of Coordination Framework” are agreements between national and state/municipal governments, aimed at the alignment of the municipal PROJECT MARKETING AND plans with the national plans and vision, and the STAKEHOLDER ENGAGEMENT promotion of coordination between agencies. Robust project transparency standards
The “Mexico Projects Hub” is a unique project marketing tool that provides a snapshot of all the projects in the country at various stages of planning and implementation. The digital platform is considered first of its kind, with detailed information on projects, details of the project lifecycle, and reference documents.
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2. Snapshot of project preparation activities
Project preparation activities are decentralised INSTITUTIONAL FRAMEWORK in Mexico, with federal and sub-national level The GCAs at each level of government are responsible Government Contracting Authorities (GCAs) for planning, implementing and supervising projects. undertaking them for their respective jurisdictions. Project preparation activities are supported by While the federal government drove the other public institutions, including the Secretariat of infrastructure agenda historically, Mexico has Finance and Public Credit (SHCP), the Investment Unit embarked on greater decentralisation over the last in SHCP, FONADIN/specific sectoral agencies/trusts, two decades with the share of sub-national (state) the National Development Bank for Public Works and investment in infrastructure increasing from 20% of Services (BANOBRAS), the congress (which has final total investment in the 1990s to around 40% in the approval for the federal expenditure budget) and the 2010s. Mexico’s project preparation is categorised by Center of Studies for the Preparation and Evaluation strong public sector capacity, established guidelines, of Socioeconomic Projects (CEPEP) (which provides and globally accepted disclosure practices. preparatory financing and project evaluation support).
Mexico has seen private investment in infrastructure Among the agencies, the role of FONADIN, in pick up during the late 1980s in sync with Mexico’s providing a strong enabling environment for project economic diversification from an oil-dependent preparation and its established track record in economy and falling oil revenues. The country has supporting project preparation and implementation, seen active private participation in infrastructure especially in the transportation sector, stands out as a since the 1990s, starting with the toll roads replicable model. program, and subsequently expanding to other GCAs play a central role in project preparation and infrastructure sectors. are involved in the preparation of the project studies The National Infrastructure Fund (Fondo Nacional for approval by the relevant authorities. The GCAs are de Infraestructura, or FONADIN) was established in required to prepare a five-year project roadmap, which 2008 to accelerate private participation in Mexico’s must be aligned to the national plan. The Investment infrastructure. FONADIN has been instrumental in Unit of SHCP is responsible for the review and providing high-quality project preparatory assistance approval of project studies (including the cost-benefit and financing for infrastructure. Today, Mexico is one analysis and value-for-money analysis) undertaken by of the leading economies in Latin America with an the GCAs. established framework for PPP project preparation FONADIN’s role in project preparation includes the reflected in a high scoring of 81 out of 100 for financing of preparatory studies, providing support ‘Preparation of PPPs’ under the World Bank’s Procuring to sectoral plans and building rigour in project Infrastructure PPPs Report 2018. identification, project evaluation, appraisal and approval processes. FONADIN supports both economically viable projects and projects that may be less economically viable but have a desired social impact.
FONADIN also provides financing and technical support through advisors for the planning, design, construction and final transfer of projects developed through private sector participation. FONADIN focuses on PPPs in sectors such as highways, ports, airports, environment, urban mass transportation, water and tourism.
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Mexico has followed a programmatic approach to The project prioritisation in the NDP is based on project planning, especially in the transport and various considerations including socioeconomic energy sectors, which has yielded transformational benefits, impact on extreme poverty, regional service delivery impact. Specific programs are development, and alignment with other investment designed to meet the medium- to long-term objectives programs and projects. laid out under the national and sectoral plans. The Project studies and structuring. While project programmatic approach has also created institutional feasibility studies are largely handled by GCAs, project capacities, either within the existing department or structuring involves multiple stakeholders, including external to the departments (for example, FONADIN the project financing entities (FONADIN, Investment and PROTRAM), and streamlined the project Unit of the SHCP, Federal Mass-Transit Support preparation and review processes. Select examples Program (PROTRAM) etc.). In the case of PPPs, the include the toll road program, renewable energy Investment Unit under the Ministry of Finance issues program, and urban mass transit program. guidelines applicable to PPP projects in terms of registry, social cost-benefit assessment, convenience MEXICO’S REFORMS AND RENEWABLE and value-for-money as a PPP. ENERGY SUCCESS Project appraisal and review. With respect to PPPs, the Mexico’s renewable energy program is GCA prepares a business case for the project, which shaped by its General Climate Change Law, includes cost-benefit analysis, feasibility assessment, which affirms Mexico’s commitment to environmental and social assessment and value-for- increase clean energy generation to 35% of money analysis. In the case of viable projects, the total generation capacity by 2024 and 50% GCA is only required to get a binding opinion from the by 2050. The solar program benefitted from Investment Unit. reforms enacted in 2014, which introduced competition in generation and helped to create On the other hand, if the projects require federal an independent grid operator (CENACE), budgetary support, specific approvals are required enabling customers to purchase power directly from the Investment Unit of the SHCP. All projects that from generators. would require support from the government budget at the federal level are reviewed and approved by the Three long-term auctions managed by SENER Inter-ministerial Commission of Public Spending, during 2016 and 2017 have created renewable Financing and Divestiture for incorporation into the capacity of 20 TWh with an investment of US federal budget, which is then approved by $9 billion. Together, these auctions helped the congress. Mexico to procure power at internationally low prices; solar power at US $19.70/ MWh and Project preparatory financing. Mexico does not have a wind power at US $17.70/ MWh. national level project preparation facility. Preparatory studies are either financed under the respective budgets of GCAs at the federal and sub-national level, multilateral development facilities (including the PROJECT PREPARATION LANDSCAPE Inter-American Development Bank (IDB) and the Project preparation activities are championed by World Bank) or from project preparation funds the GCAs, which are actively involved in project managed by FONADIN. preparation from conception to procurement. Project disclosure. The “Mexico Projects Hub” serves Project conceptualisation and planning. The as a database of investment projects and assists National Development Plan (NDP) and the national domestic and international investors to identify infrastructure program, prepared by SHCP, serve as investment opportunities in Mexico. The Investment guidance documents for infrastructure development. Unit of the SHCP also maintains a portfolio of The GCAs prepare sectoral plans in line with the investment programs and projects, which captures NDP. Mexico has also established an “Agreements information on all projects under various stages of of Coordination Framework” that formally binds the preparation. The procurement-specific aspects of federal government and the sub-national governments projects are managed through an online portal called to promote alignment in project planning and “Compranet”, which promotes transparency, market promote greater coordination among sub-national competition and efficiency in the procurement government agencies. of PPPs.
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FONADIN’S ROLE IN STRENGTHENING PROJECT PREPARATION
The federal government established Mexico’s • absence of standardised guidance and weak National Infrastructure Fund (Fondo Nacional de oversight processes, which led to quality Infraestructura, or FONADIN,) which is managed challenges in project preparation; by the National Development Bank of Mexico (Banco Nacional de Obras y Servicios Públicos • institutional capacity constraints in the or BANOBRAS), the country’s leading lender to public sector to undertake adequate project infrastructure. FONADIN is an independent trust preparation, including limitations in appropriate fund responsible for coordinating the financing design, cost and demand forecasts, as well and development of infrastructure projects as weak appreciation of risk issues and their (especially PPPs) in highways, ports, airports, the management; environment, urban mass transportation, water • most preparatory activities being driven largely and tourism. through inadequate budgetary allocations, as Currently, FONADIN is one of the most important there was limited access to project preparation conduits for PPPs in Mexico. FONADIN provides financing and technical assistance facilities; financing and technical support for the planning, • limited appreciation of project preparation. design, construction and final transfer of projects Originally the objective was to maximise developed through private sector participation. PPP participation. However, there was an FONADIN was capitalised by transferring assets from the Fund for Support of Rescue of Highway inadequate focus on the preparatory aspects, Concessions (FARAC) and Infrastructure leading to many of the projects not achieving Investment Fund (FINFRA). As of the end of 2016, financial close. Furthermore, inadequate FONADIN has cumulatively supported 117 projects time was provided for advisors appointed to with almost US $8 billion in investments, of which undertake project due diligence and feasibility 44% was non-refundable, mobilising a total of US assessments; and $25 billion, mostly in highways (51%). • absence of a specialised entity that had the FONADIN has played a catalytic role, primarily right resources and could enhance project in transportation project preparation, through (i) preparation quality. the financing of preparatory studies, (ii) providing FONADIN provides financing for preparatory support to sectoral plans and (iii) building studies for infrastructure projects through two rigour in project evaluation, appraisal and facilities: (i) recoverable or part-financing (for approval processes. profitable projects) through a credit line for Prior to its establishment, government agencies up to three years, covering 70% of the project faced several challenges in project preparation, preparation costs, and (ii) non-recoverable support such as: (for socially important but less profitable projects) through grants, covering up to 50% of expenses. • limited focus on national plans and a multi-year planning horizon; The following conditions should be met by the project to seek project preparation funding from • quality constraints on feasibility studies, leading FONADIN: (a) have private participation; (b) be to arbitrary traffic forecasts (overstating traffic procured through competitive bidding; and (c) have numbers) and stress on public finances; a partial or full source of repayment. continued...
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Key highlights of FONADIN’s interventions include: ––Project approval: The Technical Committee reviews the technical and financial aspects • Support to the National Infrastructure Program— of the project, considers the observations one of the major objectives of FONADIN is to and recommendations by the Sub- support the implementation of the multi-year Committee for Evaluation and Financing, and National Infrastructure Program, which is a six- approves or rejects the project. year roadmap for infrastructure development prepared by SHCP. FONADIN provides technical ––Enhancing institutional capacity for project and financial support for line departments and preparation—FONADIN has a multi-tier agencies in preparing the sectoral plans and project oversight, review and approval project planning. system with a judicious mix of government representation, banking and financial sector • Strengthening sectoral focus through targeted expertise, as well as subject-matter private programs—many of FONADIN’s projects are sector expertise. For instance, the Sub- under major sectoral programs that incorporate committee on Evaluation and Financing PPPs in Mexico. These include the toll roads is chaired by the Ministry of Finance program (PROMAGUA), the water operators’ and comprises of members including modernisation program (PRORESOL), a the Director of the Public Credit Unit and municipal solid waste program, and the Investment Unit in the Ministry of Finance, federal urban mass transportation three representatives of the private sector program (PROTRAM). who specialise in infrastructure (two must • Approval process and quality control— come from academic institutions and one FONADIN’s detailed operational guidelines from a civil society organisation), and one elaborate on eligibility criteria, project representative each from BANOBRAS, the preparation, quality review and approval Ministry of Public Administration and the processes, such as: division of BANOBRAS that manages the FONADIN trust. ––Project preparation: FONADIN’s Business Unit supports GCAs to identify and prepare FONADIN has supported over 50 studies for projects. This covers all activities related various programs and projects authorised to to identifying projects and conducting receive financing for preparatory studies and the studies required, including pre- transaction advisory support. These include feasibility studies, feasibility studies and projects across several sectors including project structuring. highways, the environment (including energy and waste management), urban transport, water, ––Project review: The Studies and Technical airports, ports, gas pipelines, and other social Evaluations Unit reviews the financing sectors including hospitals. proposals prepared by Business Units, requests changes, makes adjustments, and FONADIN’s website reports an authorised financing of over US $320 million in preparatory issues a technical report, which it submits studies for infrastructure projects. to FONADIN’s Sub-Committee for Evaluation and Financing.
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3. Guidance for project preparation
Guidance PPP MANUAL
Owner Secretariat of Finance and Public Credit (SHCP)
Project Project preparation and approval development stage
Details The PPP Manual provides overall guidance on the steps to carry out a PPP project. It serves as a guide to the public and private sector stakeholders on the methodologies to be followed, and the key steps in project documentation that must be followed by each entity involved in project preparation.
It sets rigorous risk-assessment standards and describes in detail the steps in the preparation and presentation of i) the socioeconomic evaluation, ii) the eligibility criteria, iii) the risk analysis, iv) the public-private comparator and v) Value for Money analysis.
Link for further details: https://www.gob.mx/shcp/documentos/manual-con-las-disposiciones- para-determinar-la-rentabilidad-social-y-la-conveniencia-de-llevar-a- cabo-un-proyecto-app
Guidance MEXICO PROJECTS HUB
Owner BANOBRAS
Project Project marketing and disclosure development stage
Details The Mexico Projects Hub is an initiative of the Mexican Government, managed by the National Bank for Public Works and Services (BANOBRAS). The Projects Hub is a web-based platform providing information on infrastructure and energy projects that require financing from the private sector. The platform also allows the user to browse information on projects according to their needs and access a factsheet of every project in the platform, including its status and additional data provided by the sponsors. Likewise, the user can access additional information to have a broader understanding regarding the way projects are implemented in Mexico, as well as domestic and foreign documents related to planning, procurement and the execution procedures of infrastructure projects and their legal framework.
The overall aim of this platform is to increase potential domestic and foreign investors’ awareness of the country’s infrastructure, thereby encouraging long-term financing for infrastructure.
Link for further details: https://www.proyectosmexico.gob.mx/en/home/
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4. Project case example: Transport Integrated System (SIT) OPTIBUS – Leon
PROJECT BRIEF QUICK FACTS Transport Integrated System (SIT) Optibus is one of the earliest mass transit projects in Leon, Mexico. The project was developed as part of VALUE the broader Transport Master Plan of 1998 and (IN US $ MILLION) is an example of close coordination between the local and federal government. 60 In a bid to strengthen the public sector capacity of local governments, the Government of Mexico established a Directorate of Mobility, under the Municipality of Leon, to drive the project planning, regulation and monitoring. The project STATUS was prepared and implemented in five phases (to date), starting in 2003. The operations Operational under the first phase were managed through 13 different concession agreements, including a centralised fare collection (Pagobus) activity and an operational management activity. The project was implemented across four distinct phases: PROJECT OWNERSHIP • Phase 1 of 26 km completed in 2003; Serves approximately 39% of the city’s transport users Municipality of Leon, • Phase 2 of 4 km completed in 2010; Serves SEDESOL approximately 60% of the city’s transport users
• Phase 3 of 5 km completed in 2016; Expected to serve approximately 80% of the city’s transport users SOURCE OF PROJECT • Phase 4 of 5 km completed in 2016-17; PREPARATORY FINANCING Expected to serve approximately 85% of the city’s transport users (523,000 trips per day) Budgetary funds, While the project preparation practices GEF, PROTRAM during Phase 1 and 2 reflected the success in integrating the stakeholders into a single unit, the subsequent phases were prepared with higher levels of scrutiny and a favourable enabling environment (post PROTRAM). SUPPORT AGENCIES The case study tracks the project preparation activities during the first phase and its evolution PROTRAM, World Bank, across the subsequent phases. SEDESOL
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Integrated approach to project planning 1993 Transport State Law 1993 – The project identification and phasing were Decentralisation of transport functions undertaken based on a comprehensive assessment of mobility patterns in the city and long-term 1994 Transport Coordination Entity (TCE) – considerations. While the Integrated Transport Plan partnership of 13 bus companies of 1988 (Plan Integral de Transporte Urbano de León – PITUL) served as the mobility plan for Phase I and 1995 Route reorganisation study II, the Integral Sustainable Mobility Master Plans (Plan Integral de Movilidad Urbana Sustentable – PIMUS) 1997 Establishment of the Directorate of served as the guidance for subsequent phases. The Transport of the Municipality of Leon PIMUS preparation was grounded in a comprehensive analysis of the existing mobility systems, including 1999 Technical team appointed to undertake road networks for public and non-motorised project studies – LOGITRANS as transportation and parking facilities in a specific technical consultants planning area, in order to define strategies which prioritise and promote sustainable transportation. 2002 Construction of Phase I The Municipality of Leon went a step ahead in mobility planning with the preparation of a vision for 2003 Operations of Phase I sustainable mobility under the Vision 2040 – Strategic Plan for Urban Territorial Planning. 2006-07 Initiation of preparation of Phase II under retroactive financing by Global 2. Strengthening public sector capacity and clarity Environment Facility in delegation of powers, accountability and targeted capacity building actions. 2009 Establishment of PROTRAM under Appreciating the need to create capacities for project FONADIN management, the Government of Mexico initiated a range of actions including institutional reform actions 2010-14 Preparation of Phase III and Phase IV and capacity building initiatives. studies under PROTRAM • Institutional reform – The project preparatory actions highlighted the need for project 2010 Initiation of Phase III studies management by the local government instead of a state or federal entity. The State Transport Law 2016 Operation of Phase III and IV 1993 started the decentralisation of transport activities to local government, followed by the agreements for the transfer of functions in 1995. Finally, the State Transport Law 2002 provided clear operational control for the local governments in transport planning, regulation and control. The Government of Mexico also established a separate Directorate of Mobility of the Municipality of Leon (within the Secretariat of Sustainable Development of the municipality) to strengthen the capacity of the local government in project planning and implementation. The staff of the secretariat include technical, environmental and social sector experts.
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• Capacity building – The project preparation was 4. Quality of external consultants critical to the also supported by targeted capacity building success of specialised projects initiatives across each of the phases. The capacity The Leon BRT system was one of the first mass transit building initiatives in Phase 1 were facilitated by the systems in Mexico and hence, the local capacity and Municipal Planning Institute IMPLAN (established understanding of the technical aspects of the project in 1994) and targeted programs for technical was limited. The initial route reorganisation studies training. During the subsequent phases, the conducted in 1995 by the departments were largely government also leveraged the World Bank Global inadequate in meeting the requirements of a mass Environment Facility (GEF) and PROTRAM funds to transit system. Consequently, in 1999, Brazil-based provide specific training for the local government consultant LOGITRANS was selected as the technical staff and other civil servants in project planning consultant to undertake the detailed technical design and technical understanding. and operational planning. The consultants brought in deep expertise and knowledge of developing BRT 3. Stakeholder engagement to facilitate private systems in other countries including the Curtiba, Brazil sector ownership and TransMilenio, Colombia. The project was also The bus transport model prior to the implementation able to engage a high-quality advisory team for the of the BRT system faced several challenges due to subsequent phases, supported by dedicated funding the prevalence of “hombre-camion” models1, wherein under PROTRAM and GEF, which helped to attract private bus ownership was dispersed, leading to quality transaction advisors for project preparation. management challenges, negative externalities, oversupply and unfavourable working conditions. 5. Programmatic approach to project preparation The transformation of the individual companies with strong appraisal standards and a dedicated into consolidated transport companies lead to the source of funds helps drive economies of scale professionalisation of operations. Specific routes were and project quality consolidated, and each private stakeholder became Learning from the success of BRT projects in Leon, a shareholder in the new entity. The consolidation Guadalajara and Mexico City, the Government of of transport stakeholders has been one of the Mexico established a country-wide plan to scale critical reasons for the success of the network. The up mass transit projects, with the establishment success of the model can be attributed to the clear of PROTRAM under FONADIN. The feasibility and and transparent selection process to facilitate the technical studies under Phases 2, 3 and 4 were transformation in ownership, and the leadership supported by PROTRAM (Phase 2 studies were and trust associated with the key officials in the retroactively financed by GEF), by leveraging its own Secretariat of Social Development (SEDESOL) and funds, as well as funds from GEF. A programmatic local government. approach (under PROTRAM) helped strengthen the project preparatory environment and also helped in scaling up mass transit projects in Mexico.
1 A transport model whereby bus facilities are highly fragmented and owned by private individuals.
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MEXICAN FEDERAL MASS TRANSIT • Superior quality assurance standards—The PROGRAM (PROTRAM) project appraisal and review standards for the Learning from the initial success of select mass approval of project studies, set by PROTRAM, transit projects, the Government of Mexico are stringent and involve multiple stakeholders. created a Federal Mass Transit program PROTRAM is supported by the Center for (PROTRAM) in 2009 within FONADIN to drive Sustainable Transport Mexico (CTS-Mexico), scale and efficiency of the sector in line with its which serves as the technical arm of PROTRAM, objective of low-carbon growth. PROTRAM’s role in charge of reviewing the technical and financial includes the financing of preparatory studies and feasibility studies, project designs and other investing in mass transit projects through grants preparatory documents. PROTRAM undertakes and loan guarantees. a two-stage approval process – the first stage review is conducted by the Consultative PROTRAM ensures quality in project preparation Working Group (GTC) in PROTRAM, followed through the following areas of assistance: by final approval from FONADIN’s Technical • Strong guidelines for project selection— Committee (CT). The GTC analyses projects PROTRAM follows strict eligibility criteria for from the technical, social, environmental, and project preparation and implementation. In the financial viewpoints to determine the basic case of project preparation, the projects selected feasibility of projects presented to PROTRAM have to be aligned with the Integral Sustainable by the cities. The GTC involves representatives Mobility Master Plan (PIMUS). The projects from SHCP, the Secretariat of Communications supported by PROTRAM should also meet and Transportation (SCT), the Secretariat of climate change considerations and emission Social Development (SEDESOL), the Secretariat standards. Additionally, the project concept of Environment and Natural Resources note must include a preliminary assessment (SEMARNAT), BANOBRAS, and FONADIN, of supply and demand analysis and cost- who participate as consultant advisers. benefit analysis, commitment to private sector The detailed process of approval is provided participation, and minimum population criteria. in the fund guidelines.
• Availability of a dedicated and sustainable source • Institutional strengthening—Support in of project preparation financing—PROTRAM capacity building initiatives for the local is funded by national toll road revenues and government related to planning, regulation financed partly by MDB loans from the World and administration of integrated urban public Bank and the Inter-American Development transport systems. Bank. The program supports the development The Mexican Government has also established a of project preparatory studies including mobility National Urban Transport Transformation Program planning, demand-supply assessment, and (UTTP), to focus on other types of urban transport technical studies for project preparation. projects, including non‐motorised transport, such PROTRAM offers grants to sub-national as bicycle and pedestrian projects. As of April governments to cover up to 100% of study 2017, the PROTRAM pipeline included 42 mass costs and 50% of infrastructure costs for public transit projects, which included 19 projects with transport projects that meet certain criteria (the authorised financial support, eight projects under city must have a population of at least 500,000). evaluation and 15 projects in the preparation phase.
The detailed guidelines are provided in the following portal: http://www.fonadin.gob.mx/wp- content/uploads/2016/08/Lineamientos_Programa_ Transporte.pdf
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1. Noteworthy practices for project preparation
EXISTING ENABLING PUBLIC MARKETING AND ENVIRONMENT STAKEHOLDER ENGAGEMENT
Distinct agencies to oversee the design of policy for A project development framework that centres on infrastructure development and its implementation increasing stakeholder collaboration and cooperation
In the Netherlands, the policy and implementation Active stakeholder engagement is central to the MIRT functions are housed under separate distinct entities. framework for project development. All stages of the While the Ministry of Infrastructure and Water MIRT process encourage a collaborative approach Management (MIWM) oversees the drafting of policies to project preparation, from project initiation in the for infrastructure development, project preparation ‘exploration phase’, which is supported by conducting and procurement is undertaken by Rijkswaterstaat, multiple stakeholder consultations through political and the implementing agency of MIWM. Rijkswaterstaat administrative meetings, to ensuring that stakeholders is responsible for the construction and maintenance provide input to the feasibility of the project under the of the main roads network, the waterway network and ‘plan exploration phase’. major water systems. Transparent disclosure of projects under PROJECT IDENTIFICATION development through the MIRT portal AND CONCEPT DEFINITION The MIRT framework mandates that all projects Using a broad-based approach to identifying and are actively monitored by the MIWM, with updates conceptualising projects published on a real time basis on the MIRT platform and also published in MIWM’s annual MIRT Overview Under the Multi-Year Programme for Infrastructure, document. Furthermore, all decisions taken for Spatial Planning and Transport (MIRT), project MIRT projects are presented to the Lower House of initiation entails incorporating all aspects of spatial Parliament on a periodic basis, along with progress planning and mobility management to design updates on project development. solutions to the country’s infrastructure challenges. As an illustration, to address the daily tailbacks problem on a major motorway in the Netherlands, the MIWM explored solutions such as promoting the use of cycling in the province and building an express bicycle connection along the motorway.
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2. Snapshot of project preparation activities
INSTITUTIONAL FRAMEWORK the main waterway network, and the main water Public administration in the Netherlands is systems. It also undertakes project development divided across four tiers: central government, and implementation on behalf of the MIWM. the provinces, the municipalities and the water • The Netherlands Environmental Assessment authorities. Project preparation is considered to Agency (PBL), which contributes to political and be a joint effort of the different tiers of the Dutch administrative decision-making by conducting public administration framework, in which each outlook studies, analyses and evaluations tier has a clear responsibility brought together commissioned by the MIWM, other national bodies, under a unified framework. and international agencies.
Project preparation and development in the • The Knowledge, Innovation and Strategy Netherlands is governed by procuring authorities, Directorate (KIS), which leads the knowledge which include local governments, municipalities, management and capacity building functions and port authorities, amongst others. At the central of the MIWM. government level, two agencies oversee and coordinate project development in infrastructure: • The Council for the Environment and Infrastructure, the Ministry of Infrastructure and Water Management which is the primary strategic advisory board (MIWM) and the Ministry of Finance (MoF). for the Dutch government and parliament in matters relating to the physical environment and At the sub-national level, the project preparation infrastructure. It provides independent advice to the and implementation responsibility is managed across MIWM and the parliament on matters relating to the provinces, municipality and water authority. long-term policy for infrastructure development.
Ministry of Infrastructure and Water Ministry of Finance (MoF) Management (MIWM) MoF is responsible for financial-economic policy in The MIWM oversees policy, implementation and the Netherlands, the management of government inspection of infrastructure development in the finances and policy concerning the financial markets. It Netherlands. To aid the development of policies, the prepares the annual national budget and presents it to MIWM houses three directorate-generals, responsible the parliament for approval, which outlines the planned for designing overarching policies for development in expenditure of all ministries for the ensuing year. the areas of mobility, water management, aviation and maritime affairs and the environment, as follows: PROJECT PREPARATION LANDSCAPE • The Directorate-General for Mobility and Transport The responsibilities for project preparation are (DGB) focuses on the continued development of decentralised to the respective line departments and the network quality of airways, waterways, railways, sub-national entities, and the Ministry of Finance the road network, harbours and ports. is responsible for establishing the policy on budget execution, including the normative Design-Build- • The Directorate-General for Spatial Development Finance-Operate-Maintain (DBFOM) policy, monitoring and Water Affairs (DGRW) looks at integrating application of the budget execution policy, and spatial development and mobility with the providing guidance on cross-project issues. infrastructure and spatial planning vision. For large infrastructure projects, the Netherlands has • The Directorate-General for the Environment and adopted a unique collaborative approach, namely International Affairs (DGMI) is responsible for The Multi Year Programme for Infrastructure, Spatial monitoring the environmental impact of policies, Planning and Transport1 (MIRT) framework, developed projects and programs in the Netherlands. by the MIWM. MIRT comprises infrastructure projects The MIWM is also assisted by a host of support and programs in which the national and regional agencies in infrastructure development, governments collaborate to find a common solution which include: to specific problems, after conducting analysis from different perspectives and development objectives. • Rijkswaterstaat, which is the executive agency of the MIWM responsible for the main road network, 1 Meerjaren Programma Infrastructuur, Ruimte en Transport
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The MIRT process for project preparation ADOPTING A PROBLEM ORIENTED In a MIRT track, the parties work phase-by-phase to APPROACH UNDER MIRT – AN EXAMPLE substantiate the task in increasingly concrete terms. While a typical solution to tackle the daily The MIRT program requires a project to go through tailbacks on a section of the motorway near a four primary phases, with each phase ending with big city would be to upgrade the motorway, the a political-administrative decision – MIRT Study, Netherlands adopts a more holistic approach. MIRT Exploration, MIRT Plan Elaboration and MIRT MIWM consults the respective province, the Realisation. municipalities, and the regional business The starting point for every MIRT track is the Initial community, asking about their plans for the Decision to launch a MIRT Exploration. MIRT projects area. The province has conducted a mobility can be either implemented through public financing analysis of the region and knows that the or through PPPs on a standard DBFOM basis. Each tailbacks are mainly caused by local commuter year, the MIRT is presented to the Lower House as an traffic. Additionally, the municipality has appendix to the budget of the MIWM and this provides launched a ‘Move Yourself to Health’ program the necessary political and fiscal commitment to and aims to encourage residents to cycle. the MIRT. The steps in project preparation are detailed Together, the parties arrived at a joint ambition: below. improving mobility between the residential area and the business park and improving residents’ Project initiation and concept definition. The project health. Following an exploration of several initiation and concept definition is covered under the solutions, they decided to implement a solution ‘Plan Study’ and ‘Plan Exploration’ phases of the MIRT that involves an express bicycle connection framework. The MIRT study phase is conducted to to the business park, in combination with develop a clear and common description of the needs, agreements with employers regarding the issues and necessities that the envisaged project must promotion of cycling and flexible working hours solve. This provides for a common starting ground and influencing the behaviour of motorway for the involved stakeholders in the MIRT process of users in order to improve traffic circulation. The assessment. This phase ends with the Initial Decision, package offers a solution to both accessibility which relates to the choice on whether to conduct a and health issues. In addition, it contributes MIRT Exploration. The Initial Decision also stipulates to the sustainability goal of MIRT, namely to the role to be played by each of the stakeholders and requires that financing sources for 75% of the cost of reduce CO2 emissions. the most obvious solution are identified.
The exploration phase of the MIRT framework follows The MIWM is a participant in all MIRT tracks (project a collaborative approach that requires project initiation or program). However, other ministries and regional to start with a series of political and administrative partners may also participate or launch MIRT meetings. These meetings are aimed at discussing tracks. Such regional partners may be the provinces, the development needs of an area, fixing the strategic municipalities, transport regions, or district water development goals and the initiatives to meet boards. NGOs and businesses may also participate by these goals. Thereby, discussion, collaboration and providing input to solutions. consensus between important stakeholders is set as In the MIRT framework, the country is divided into a requirement for starting a new project concept. The five regions2, with the central and local governments exploration phases typically comprise the following jointly designing the Area Agenda for each MIRT activities: evaluating the strategic alignment of the region. The Area Agenda presents a coherent vision proposed concept, options evaluation to assess for development in the area. Annually, administrative the benefits and impact of each alternative on the consultations take place between the central and local economy, environment and society, and selection of governments for discussion on current projects in the a preferred alternative to undertake the detailed project region and for making financial and/or administrative study. As options are collectively evaluated, agreements where necessary. the MIRT committee may reach a Preferential Decision to serve as a recommendation for the next phase – 2 Noord (North), Oost (East), Zuid (South) , Zuidwest (South West) and Plan Elaboration. Noordwest (North West) regions
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Project feasibility and structuring. The process of The Gateway Review is not mandatory and is usually preparing detailed project studies under the MIRT performed as a confidential peer review assessment framework is governed by the Plan Elaboration phase. at the request of a manager. The Gateway Review At this stage, the identified solution at the end of the provides an independent view on the current progress exploration phase is then further detailed, evaluating of the project or program including observations and the design, compliance with legal regulations, recommendations. financial viability and cost benefit analysis and the socioeconomic impact of the project. At this stage, How has the MIRT framework streamlined project the project study must culminate in a Project Decision preparation in the Netherlands? to move to procurement and funding approvals. Good practice guidance on project preparation. Through The essence of the project decision is that a final the former PPP Knowledge Centre, the Netherlands impression of the planning, scope and budget is has developed a knowledge base of good practices in presented, before the market is approached in the developing large infrastructure projects. This know- realisation phase. how has evolved into the sophisticated framework Project approvals and processes. The Dutch Gateway of the MIRT. MIRT project preparation is steered by Review Method is based on the Gateway Program good practice procedural guidance and tools such as in the United Kingdom. It is housed in the Bureau social cost benefit analysis, preparation of business Gateway in the Ministry of Interior and Kingdom cases, risk management, project governance, gateway Relations. Since 2007, over 50 high risk projects reviews etc. that have contributed to successful and programs have been reviewed with very positive project execution. results. This is part of the Dutch Government’s Prescribing a wide base approach for project evaluation. initiative to improve the management and delivery Complex projects benefit greatly from an integrated of high-risk projects by providing an independent region-oriented approach to decision-making that confidential assessment and improving the capability cuts sectoral barriers. Through the prescribed of project management skills in government via Consultations Committee, MIRT helps to bring in actively sharing lessons learned. Typical project level varied perspectives on spatial functions, such as gateway reviews include: transport, residential and commercial development, • Gateway 1 - Purpose and justification is performed at flood risk management, and environmental impact, into the decision-making process for a project. the start of a project to confirm its rationale.
• Gateway 2 - Preparation and Procurement Stage is Enhanced ownership by all stakeholders. executed once the project approach is firm and A consultative approach to project development can often fail unless it is complemented by allocating seeks to examine whether the project’s rationale responsibility for implementation. The MIRT and the intended results are still demonstrable and framework requires that all stakeholders involved desirable. in the consultation are responsible for ensuring the • Gateway 3 - Realisation Stage is executed as soon feasibility of the project by providing financial resources as the suppliers are formally approached and seeks wherever required and enabling implementation to verify whether the intended approach will be through legal and policy interventions. This furthers successful in this realisation phase. the broad-based approach, as inputs from multiple stakeholders must be accompanied by ‘an intention to • Gateway 4 - Readiness for implementation is work things out together, from start to finish.’ performed before the project team transfers its result to the line organisation(s) or just before the implementation phase.
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A multi-layered decision-making approach. The MIRT process prescribes a funnelling approach to decision- making, with decisions being taken at multiple phases of project preparation and implementation. For each phase, the framework specifies the nature of the decision to be taken and the process to be followed. This multi-layered approach allows for less optimal solutions to be filtered, along with compelling the Consultations Committee to re-evaluate project decisions at each stage.
Increased transparency and accountability. The MIRT Overview, published on an annual basis as an annexure to the budget, is an informative publication on the state of affairs and the planning of government projects and programs in the MIRT framework. Furthermore, all decisions taken by the Consultations Committee for an area are presented to the House of Representatives, along with progress updates on site visits by members of the committee. MIRT also requires that all projects have a clear vision and well-articulated goals and success factors to enhance understanding.
Creation of a pipeline of bankable projects. Under the five-year planning horizon of MIRT, a pipeline of projects is developed. As projects are filtered through each of the decision stages, the quality of projects in the pipeline is increasingly strengthened – allowing for only viable projects to reach the realisation stage. Information on the project pipeline and its progress is kept updated on the MIRT portal. The phased decision process also provides for reasonable predictability in the planning for the projects in the pipeline.
Extensive capacity building initiatives to coach practitioners on the framework. MIWM has deployed a learning portal, with published guidance documents on the MIRT process, as well as a platform for practitioners to share their experiences and engage in discussions. The ministry also conducts intensive courses on the framework, open to civil servants as well as private experts, along with knowledge meetings and masterclasses on various aspects of the framework.
Gateway review process for quality enhancement. The Dutch Gateway Review process also provides an opportunity for government project managers to enhance the quality of their project preparedness.
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3. Guidance for project preparation
MULTI-YEAR PROGRAMME FOR INFRASTRUCTURE, SPATIAL Guidance PLANNING AND TRANSPORT
Owner Ministry of Infrastructure and Water Management (MIWM)
Project Overall project lifecycle development stage
Details To improve the infrastructure project development process, the MIWM has developed an investment program called MIRT (Multi-Year Programme for Infrastructure, Spatial Planning and Transport). MIRT is an integrated program for the preparation and decision-making process of infrastructure projects. The MIRT program has rules, procedures and a framework– ‘rules of the game’ in order to direct how a project initiative that needs state funding should be developed and how decisions on project initiatives should be made.
The MIRT program requires a project to go through four primary phases, with each phase ending with a political-administrative decision – MIRT Study, MIRT Exploration, MIRT Plan Elaboration and MIRT Realisation.
Link for further details: Overview (in English): https://www.government.nl/binaries/government/documents/ leaflets/2018/02/07/the-dutch-multi-year-programme-for-infrastructure-spatial-planning-and- transport-mirt---summary/107287_MIRT_ENG_WEB.pdf
Link for further details: Detailed guidance (in Dutch): https://www.leerplatformmirt.nl/over+mirt+nieuw/handreikingen/ default.aspx
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4. Project case example: Afsluitdijk project
PROJECT BRIEF QUICK FACTS The Afsluitdijk (Cut-off Dike) project is a causeway redevelopment plan that was implemented through the PPP model. VALUE (IN US $ BILLION) The Afsluitdijk is a 32 km-long, 90-metre wide major causeway in the Netherlands stretching from Den Oever on Wieringen in the North 1.785* Holland province, to the village of Zurich in the Friesland province. The dike was constructed between 1927 and 1933, after the devastating floods of 1916, and over the last 85 years has been a check on the sea level rise and flooding. STATUS The dike sluices discharge surplus water from the Ijsselmeer Lake to the Wadden Sea at low Pre-construction water levels.
The redevelopment project (of the dike) was initiated in the context of rising sea levels and climate change challenges leading to revised design and structural considerations and PROJECT OWNERSHIP enhanced safety standards. The key activities under the project scope include the strengthening Rijkwaterstaat of the causeway structure, and guards and sluices (including the lock complexes at Den Oever and Kornwerderzand), increasing the capacity to store and drain water, improvement of the A7 motorway and creating an eco-friendly space for recreational activities. SOURCE OF PROJECT PREPARATORY FINANCING Rijkswaterstaat is responsible for the overall management of the project. The renewal project Budgetary allocation was initiated in 2012 and achieved financial close in May 2018. The concession is for a Design- Build-Finance-Maintain (DBFM) contract covering a period of 25 years. The concessionaire for the project is a consortium called Levvel, which includes BAM PPP PGGM, Van Oord Aberdeen SUPPORT AGENCIES Infrastructure Partners, and the Rebel Group (as financial adviser). The project construction is De Nieuwe Afsluitdijk** expected to be completed by 2022.
* Budget set aside for the project, Exchange Rate: €1 = US $1.14 (as of December 2018)
** De Nieuwe Afsluitdijk is a cooperation between the provinces of Noord-Holland and Fryslân and the municipalities of Hollands Kroon, Súdwest-Fryslân and Harlingen (along with citizens, and private sector stakeholders).
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Establishing an integrated project vision 2005-06 Initial study to assess the safety need maximising service delivery impact of the Afsluitdijk While project preparation practices in most countries are initiated and prepared by the line departments 2007 Initiation of project “Future Afsluitdijk” in isolation and are generally targeted at the specific area of concern, the Netherlands, aided by the 2008-09 Joint market reconnaissance by MIRT approach, facilitates integrated planning Rijkswaterstaat and local governments elements into the project concept. In the case of the – four integral visions and two Afsluitdijk project, the Rijkswaterstaat expanded the reference designs identified project objective beyond “improved flood protection standards” to include multiple other smaller sub- 2010 Preliminary environmental impact projects in line with the aspirations of the citizens. assessment, cost effective analysis of This integrated approach to project planning was the initial designs detailed under the Afsluitdijk Master Plan, which outlined the strategies for sustainable development 2011 Decision on preferred design under the of the dike, potential for tapping renewable energy, Afsluitdijk master plan improvement of service delivery standards and leveraging the unique spatial quality of the region 2013 Plan elaboration and initiation of for creating active recreational spaces for the local preparatory documents community. The project also gave due importance to renewable energy projects, especially considering that 2016 Launch of tender for procurement the primary project objective was driven by climate change considerations (rising sea levels or flooding).
2017 Finalisation and approval of all the In line with the Master Plan objective, the phases of the integration plan Rijkswaterstaat, along with De Nieuwe Afsluitdijk, designed multiple components under five broader 2018 Selection of preferred bidder – categories: commercial and financial close i) Safety – Redevelopment of Afsluitdijk, and strengthening of Den Oever and 2023 Scheduled completion of construction Kornwerderzand locks
ii) Water management – Increase the capacity to drain water, solar energy pumps
iii) Economic activity – Tourist facilities, ‘Icon Afsluitdijk’, convention centre
iv) Sustaining Nature – Initiatives for a passage for fish at Den Oever
v) Renewable energy – Blue energy system3, tidal and solar energy, electric pumps
3 Blue Energy is the technique by which energy is extracted from the difference in the salt concentration of salt and fresh water.
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2. Stage-wise planning phase under the broader MIRT framework The project planning and implementation for the Afsluitdijk project was guided by the MIRT framework and was divided into four stages of decision-making. While the early reconnaissance was undertaken during the period 2008-09, the detailed plan development was initiated in 2012.
Reconnaissance phase Plan development phase Realisation phase
MIRT 1 MIRT 2 MIRT 3 MIRT 4 Start decision Plan development Project decision Delivery decision
The plan development phase for the Afsluitdijk project was further sub-divided into a seven-phase process:
• Phase 1 – Environmental impact report (2013)
• Phase 2 – Draft integration plan, environmental impact report and other design plans (2015)
• Phase 3 – Government integration plan and review of appeals against the plan (2016)
• Phase 4 – Review of the draft decision on the permit/licence on the basis of the Nature Conservation Act (2017)
• Phase 5 – Appeal against the Amendment Decree on the permit/licence issued (2017)
• Phase 6 – Supplement to the government integration plan4 (2017)
• Phase 7 – Appeal against the government integration plan and finalisation (2018)
Each phase of development was initiated through a separate notification, followed by the development of a plan sub-component and stakeholder consultations and a specific notification indicating the end of the phase. The preparatory documents at each phase of development were made available for citizen inputs and comments. The project phasing also provided for flexibility in design mid-way through the process.
4 Updated to include the spatial integration of solar panels, increasing the passage width of the locks on Kornwerderzand and more space for the construction of pump buildings.
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3. Flexibility in project design and implementation of scope beyond “flood protection” functions. The for the bidder consultations during the plan development phase While the Rijkswaterstaat’s “Rijksinpassingsplan were designed such that Rijkswaterstaat focused Afsluitdijk” (government implementation plan) serves on strengthening the core components (the as the blueprint for project implementation, the reinforcement of the dike) and aligned the public government also provides some flexibility in planning consultations with this focus, while the consultations and implementation through the introduction of an surrounding the other project components were innovative planning concept – “Oplossingsruimte” championed by the regional authorities (organised (Solution space). The innovative plan provides under ‘De Nieuwe Afsluitdijk’ / New Cutoff Dike). guidance on the maximum space allotted, general The consultations during the plan development phase spatial requirements and the conditions for were led by Rijkswaterstaat and incorporated the implementation. Under this overall guidance, the highest standards in transparency and accountability. bidders were provided the flexibility to provide a More than 17 rounds of stakeholder consultations detailed elaboration of the design and implementation were conducted during the plan development phase. plan. This gives the concessionaire the space for The project documents and consultation minutes creativity and the possibility to develop cost-effective were uploaded in the “Platform Participatie”5 portal. design solutions within the overall implementation plan boundaries. Because of this, there is a greater 5. Local government and local community ownership chance of an innovative and more functional design. backed by innovative citizen engagement methods The boundaries of the solution spaces are also crucial to sustain project momentum strengthened through the planning process, starting The initial reconnaissance for the project anchored from an initial rough definition and then tightening by a partnership between local government and along the way. The concept does not lead to dilution Rijkswaterstaat brought in ideas for the integrated of the design or Environmental Impact Assessment redevelopment of the dike. The phase also (EIA) standards. This innovative structure ushered in involved a contest to pool-in innovative designs for a new approach to PPP and relationship management redevelopment and rejuvenation of the dike and between stakeholders, especially Rijkswaterstaat and nearby areas. Rijkswaterstaat received inputs from the concessionaire. eight consortia on a coherent integral vision on the development of the Afsluitdijk and its surrounding 4. Stakeholder engagement integrated to each area, including spatial design and technical, legal phase of project preparation and financial feasibility. The designs reflected a One of the stand-out factors in the Afsluitdijk multifunctional transformation of the Afsluitdijk, project preparation is the range and depth of the combining water safety with nature, sustainability, consultation process. The regional authorities and energy production and tourism. The initial the Rijkswaterstaat initiated open consultations with reconnaissance phase helped build promising new public and private parties to attract as many new ideas and generate favourable brand equity for the ideas as possible. The strategy was aimed at getting project, especially with the local community. ‘more value’ out of the dike by developing integrative However, the financial crisis and the subsequent ideas which could add new functions. government budget restrictions led to the The public consultation process was divided government prioritising and focusing on the into two distinct phases – initial reconnaissance redevelopment of the dike. Backed by the strong and market survey (joint market reconnaissance brand equity generated during the reconnaissance by Rijkswaterstaat and regional governments phase, the provinces and municipalities joined during 2008-09) and the plan development stage together under the program ‘De Nieuwe Afsluitdijk’ (anchored by Rijkswaterstaat with active support (The New Afsluitdijk, DNA) to drive the broad vision from regional governments during 2013-17). for Afsluitdijk. The DNA played an active role in the Starting with the Afsluitdijk Master Plan, each development of design and implementation of the stage of project preparation involved extensive project components and also raised funds for stakeholder consultations. The consultations during project preparation and implementation. the reconnaissance phase laid the foundation for the wider project design, especially the expansion
5 Link to the portal – https://www.platformparticipatie.nl/ projectenlijst/Afsluitdijk/index.aspx
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT IDENTIFICATION ENVIRONMENT AND CONCEPT DEFINITION
Strong and effective institutional framework, with Systematic approach for the preparation of a project well-defined and clearly demarcated responsibilities pipeline and mapping of project outcomes to the The Philippines has established a robust institutional national socioeconomic targets set-up to enable effective project development, with The Philippines follows a systematic approach to each institution playing a specific role. The National prioritising infrastructure projects, ensuring the Economic and Development Authority (NEDA) is the appropriate allocation of limited government resources. central planning body of the Philippines that determines The NEDA compiles a list of prioritised projects under the broad socioeconomic parameters for national and the Public Investment Program (PIP) at the national sub-national development projects. The NEDA Board, level. A subset of the PIP is the Three-year Rolling or its Executive Committee, approves large-scale Infrastructure Program (TRIP), comprising all publicly strategic infrastructure projects. The PPP Governing funded infrastructure projects, which in turn forms the Board, as the overall policy-making body for all public- basis for finalising the government’s national budget. private partnership (PPP) related matters, helps to create an enabling policy and institutional environment Further, projects are evaluated for strategic relevance for PPPs in the Philippines. The PPP Center, as an and mapped to the long-term economic development attached agency of NEDA, assists not only during plan through a defined quantitative framework, known the project preparation activities, but also during the as the Results Matrix. implementation stage of PPP projects. PROJECT APPROVALS PROJECT PREPARATION AND QUALITY ASSURANCE FINANCING Interdepartmental coordinated support for the Partnerships with international development evaluation and appraisal of PPP projects agencies to fund project preparation activities To evaluate PPP project proposals in the Philippines, and build local capacity an interdepartmental committee, the Investment To support project preparation activities for PPP Coordination Committee (ICC), is formed, to bring in cross-functional expertise for project appraisal. projects, a dedicated project preparation fund, the The ICC has two levels: the ICC-Technical Board (TB) Project Development and Monitoring Facility (PDMF), and the ICC-Cabinet Committee (CC). ICC actions has been established, which is managed by the PPP are elevated to the NEDA Board for confirmation. Center. The PDMF is a US $102 million revolving fund, The ICC-TB evaluates all aspects of a PPP project co-financed by the Government of the Philippines with specific emphasis on each agency’s technical and the Government of Australia through the Asian expertise. The ICC-TB recommendation is elevated to Development Bank (ADB). The ADB also provides the ICC-CC for approval. The ICC-TB is composed of technical assistance and funding support through senior representatives from the following agencies: the Infrastructure Preparation and Innovation Facility NEDA (Chairperson), Department of Finance (IPIF), a US $100 million loan to assist the Department International Finance Group (Co-Chairperson), of Transport and the Department of Public Works and and the DOF Corporate Affairs Group, Office of the President, Department of Budget and Management, Highways for undertaking project development. These Department of Trade and Industry, Department of funds also assist the implementing agencies and the Agriculture, Bangko Sentral ng Pilipinas, Department PPP Center to undertake capacity building initiatives of Environment and Natural Resources, Department like training, process guidelines and good practice of Energy, and the PPP Center (Members). Other manuals for national and local government agencies. government agencies are invited to participate in the ICC-CC and TB deliberations, as necessary.
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2. Snapshot of project preparation activities
During the period 1980 – 2009, the Philippines INSTITUTIONAL FRAMEWORK 1 suffered from underinvestment in infrastructure. Project preparation activities in the Philippines are To address this, one of the steps taken by the decentralised and largely driven by implementing Government of the Philippines was to overhaul agencies, such as national government agencies the enabling framework for project development (NGAs) and departments, government-owned and delivery, to support and encourage private and controlled corporations (GOCCs) and local investment in infrastructure. The establishment of government units (LGUs). The National Economic and the Philippines PPP Center along with the Project Development Authority (NEDA) and the PPP Center, Development and Monitoring Facility (PDMF) has in turn, support the implementing agencies, at the been central to this transition. national level. Recognising the contribution of sound project preparation in the implementation of complex NEDA infrastructure programs on a large scale, the NEDA, established in 1972, is the Philippines’ central Philippines has also partnered with international socioeconomic planning body that formulates policies, development agencies, such as the Asian plans and programs to set the broad socioeconomic parameters for national and sub-national level Development Bank (ADB) and the Governments of development. It is responsible for reviewing, evaluating Australia and Canada, to establish dedicated funds for and monitoring infrastructure projects in line with the financing and building capacity for project preparation. national development plan. It prepares the Philippines At the national level, funding for project preparation Development Plan (PDP), a six-year plan that details is supported by the Project Development and the socioeconomic targets of the national government, Monitoring Facility (co-financed by the Government and consolidates the Public Investment Program (PIP), of the Philippines and the Government of Australia a rolling list of priority programs and projects (PAPs) to through the ADB for PPP project development), the be executed by the implementing agencies. NEDA also Project Development and Related Studies Fund (a collaborates with regional development councils (RDCs) special purpose fund established under the 2018 to prepare the Regional Development Plan (RDP), which General Appropriations Act with an allocation of US adds a spatial dimension to the national development $30 million), and the Infrastructure Preparation and plan by identifying the regional contributions to socioeconomic targets. At the national level, the Innovation Facility (a technical assistance loan from NEDA Board, which is chaired by the President of the the ADB to the Department of Public Works and Philippines, serves as the final approving authority2 for Highways and the Department of Transportation large-scale public investment and PPP projects in the to strengthen project preparation in the transport Philippines. sector). These initiatives are encouraging a systematic approach to project identification, assessment, The NEDA Board, with the assistance of the seven 3 prioritisation and preparation. cabinet-level interagency committees , plays a central role in planning and preparing infrastructure development projects in the Philippines: the Development Budget Coordination Committee (DBCC), the Investment Coordination Committee (ICC), the Committee on Infrastructure (INFRACOM), Social Development Committee (SDC), Committee on Tariff and Related Matters (CTRM), Regional Development Committee (RDCom), and the National Land Use Committee (NLUC).
Development Budget Coordination Committee: The DBCC is responsible for approving the macroeconomic assumptions and economic policy directions for the preparation of the annual national government budget
2 Pursuant to Section 2.6 – Approval of Projects, of the Revised 1 On average, infrastructure investment as a percentage of the Implementing Rules and Regulations of Republic Act 7718 – Build country’s gross domestic product (GDP) was 2.1%, and Operate Transfer (BOT) Law. infrastructure development was not on par with the needs of the growing population. 3 http://www.neda.gov.ph/functions-and-organizations/
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and for the requirements of the PDP. It also advises the state universities and colleges (SUCs), and local President on the approval of the annual government government units (LGUs), as well as to the private expenditure program and allocating government budget sector, to help develop and implement critical for capital outlay for infrastructure development. infrastructure and other development projects. The PPP Center also advocates policy reforms to improve Investment Coordination Committee: ICC reviews the the legal and regulatory frameworks governing PPPs fiscal and monetary implications for major capital in order to maximise the potential of the infrastructure projects (MCPs)4 and reports the status of these and development projects in the country. directly to the President. It also reviews and evaluates specific MCPs with respect to technical, financial, Through Executive Order No. 136, the PPP Center acts economic and social feasibility and submits its as the Secretariat of the PPP Governing Board. The recommendation to the NEDA Board for confirmation. Board is the overall policy-making body for all PPP- related matters, including the PDMF. It is responsible The ICC Technical Board (ICC-TB) cautiously reviews for setting the strategic direction of the Philippines and evaluates public investment programs and PPP program and creating an enabling policy and proposals and refers the meritorious ones to the ICC institutional environment for PPPs. Cabinet Committee (ICC-CC) for approval. ICC-TB primarily focuses on advising a project proponent on As part of its mandate to further develop PPPs in the various options available in implementing and the country, the PPP Center also undertakes various financing a program or project prior to sending it to the initiatives to educate and train the implementing ICC-CC for final approval. The ICC Cabinet Committee agencies on the general principles and processes (ICC-CC) is the highest executive branch of the ICC of PPPs. It conducts training and workshops on the that approves the MCPs and presents decisions to the fundamentals of PPPs for both the NGAs and the NEDA Board for final approval. A certification of ICC LGUs. At present, there is an increasing emphasis by approval is necessary for a project’s requirements to be the PPP Center on improving the capacities of LGUs, included in the annual budget. through the Center’s Local PPP Strategy. This strategy is focused on assisting LGUs in using the PPP model Committee on Infrastructure: INFRACOM advises the as a means to improve their project delivery of President and the NEDA Board on policy and planning public services. The PPP Center has also developed matters concerning infrastructure development. knowledge products, such as the NGA PPP Guidebook, It also functions as a coordinating agency and that have been made available to the GCAs. Further, makes recommendations to the President regarding the technical assistance granted to NEDA and the government policies and aligning national development PPP Center by development agencies also contributes strategies to infrastructure projects and programs. to strengthening the PPP program via capacity building initiatives. The PPP Center supports the pre- PPP Center investment activities through the PDMF to create a The Government of the Philippines, by virtue of the pipeline of viable PPP projects. Executive Order No. 8 series of 2010, as amended by Executive Order No.136 series of 2013, mandated the Project Facilitation, Monitoring and Innovation Task PPP Center to facilitate the implementation of the PPP Force (PFMI) program and projects in the country. The PPP Center, Under the ‘Build Build Build’ initiative of the which is the main driver of the PPP program, serves government, 75 flagship infrastructure projects as the central coordinating and monitoring agency have been identified by INFRACOM and the ICC for all PPP projects in the Philippines. It champions from the PIP. These flagship projects represent the the country’s PPP program by enabling implementing major capital undertakings of the government in the agencies in all aspects of project preparation, medium-term. NEDA has established the PFMI in managing the PDMF, providing project advisory and order to initiate policies and processes to address facilitation services, and monitoring and empowering bottlenecks and gaps in the project cycle of the agencies through various capacity building activities. Infrastructure Flagship Projects (IFPs) i.e. project The PPP Center provides technical assistance to identification and preparation, appraisal, funding and national government agencies (NGAs), government- budget allocation, procurement, implementation and owned and controlled corporations (GOCCs), post-evaluation. The PFMI task force is composed government financial institutions (GFIs), of representatives from the major economic and infrastructure agencies.
4 MCPs are projects costing more than US $9.5 million [Exchange rate: PHP 1 = US $0.019, as of December 2018]
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PROJECT PREPARATION LANDSCAPE The TRIP is prepared with an aim to ensure that Project identification and concept definition.The the agencies’ annual budget ceilings are optimised Philippines follows a systematic and comprehensive and are used to fund priority PAPs. All the agencies approach to identifying and budgeting infrastructure submit their respective TRIPs to the NEDA, which programs and has set up two public expenditure reviews agency TRIPs and prepares a consolidated management (PEM) systems: the Public Investment TRIP, which is presented to INFRACOM for Program (PIP) and Three-year Rolling Infrastructure approval before submitting it to the Department of Program (TRIP), which provide a pipeline of Budget and Management (DBM). Here, the DBM, infrastructure programs and projects to be along with the DBCC, determines the optimised implemented in the medium-term horizon. spending levels and hard budget ceilings of the agencies. Finally, the DBM, in consultation with all • Public Investment Plan: The PIP is a six-year the agencies, prepares the National Expenditure programming document accompanied by the Program (NEP), the final budget document of the Philippines Development Plan (PDP) and the Government of the Philippines. Results Matrix (RM). The PIP serves as an instrument that strengthens the linkages between Project feasibility and structuring. Given the country’s institutional set-up for project development, project planning, programming, budgeting, monitoring and feasibility studies and structuring are driven entirely evaluation for better public resource allocation. by implementing agencies. While the guidelines It also helps to create a pipeline of projects and mandated by ICC on project evaluation provide a programs (PAPs) to be reviewed and processed by benchmark for the aspects to be covered during the ICC and the NEDA Board. The Core Investment the feasibility stage, these are only applicable for Programs/Projects (CIP) is a subset of the PIP and the large-scale infrastructure projects that require serves as a project pipeline of big ticket PAPs for ICC approvals. For smaller projects, implementing the ICC and NEDA Board. To include and prioritise agencies have derived their own requirements PAPs in the PIP, NEDA follows a three-tier multi- and processes, which vary between departments. criteria framework, covering prioritisation at the For instance, the Department of Public Works and implementing agency level (Tier 1) and at the NEDA Highways requires that project proponents (which Secretariat level (Tier 2), and validation at the could be the regional and district offices of the Planning Committee level (Tier 3). department or local government units) prepare and • Three-year Rolling Infrastructure Program: The TRIP submit detailed feasibility studies at the project is a subset of the PIP and comprises all nationally initiation stage itself, which, in turn, undergoes a funded infrastructure projects. Implementing two-stage vetting process within the department. agencies are required to specify the different stages The Department of Transport mandates that all of the projects that are listed under the TRIP, so feasibility studies must include the following aspects - that readily implementable projects are prioritised description of product, beneficiaries, proposed annual for the budget over those under development. The budget, demand analysis, target population, market TRIP enables the programming and monitoring growth rate, supply chain, traffic flow, and site visit. of project development to ensure that the government’s targeted spending on infrastructure projects is achieved.
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Project approvals and processes. The Investment South Wales (NSW) in Australia. This partnership Coordination Committee (ICC) of the NEDA Board is entailed peer-to-peer exchanges, technical advice the agency responsible for the evaluation and review and knowledge sharing lectures and workshops, of project proposals. In the case of public investment roundtable discussions, and dialogues and site visits programs, there are three levels of ICC involvement: to successful PPP projects in NSW. the ICC Secretariat accepts the proposal and sends Financing mechanisms for project preparation. Due an acknowledgement to the implementing agency, to government budget constraints at both the the ICC-Technical Board (ICC-TB) appraises, evaluates national and local levels, adequate funding for project and recommends the project to the ICC-Cabinet preparation is not usually budgeted for. Often budget Committee (ICC-CC) for the first level of approval constraints have led to an absence of international which endorses the project to the NEDA Board for expertise in project preparation and have impacted final confirmation. In the case of PPP projects, the the quality of the preparation. Therefore, as a project proposals are reviewed by the PPP Center response to such issues, the national government is for its commercial viability and bankability, finance encouraging the setting up of independent project structuring, and value for money to the government, preparation facilities that provide demand drive and are subsequently endorsed by the ICC-TB. assistance to merit-worthy projects. For example, Given its prior history with PPPs which have the NGAs can access PDMF for PPP projects, and experienced challenges in achieving financial close, the Project Development and Other Related Studies as a standard process, most PPPs in the Philippines (PDRS) Fund for public investment projects. In some undertake extensive engagement with the private cases, international development agencies have sector at the structuring and procuring stage. This extended financing to set up technical assistance engagement has included market soundings in facilities to conduct project preparation activities relation to potential projects, one-on-one meetings and capacity building. At the sub-national level, with prequalified bidders, and the provision of project the Project Technical Assistance and Contingency information through virtual data rooms. Further, Fund (established by the Municipal Development the PPP program in the Philippines has centered on Fund Office under the Department of Finance) has a comprehensive public communication strategy. been established to provide funds for preparation Under the Guidelines on Public Consultation and and submission of feasibility studies, and detailed Engagement for PPP Projects mandated by the PPP engineering designs for project implementation. Center, all implementing agencies are required to develop a consultation plan for each project, which will identify the stakeholders to be engaged with, the timing, and the platforms to be used for the public engagement. These guidelines also mandate that all projects must complete a public consultation exercise prior to submitting proposals to the ICC for approval.
To aid and support independent quality assurance of project proposals and government capacity building, the Asian Development Bank (ADB), along with the Governments of Australia and Canada, supported a technical assistance program, wherein ‘twinning partnerships’ were established between officials in the PPP Center and their best practice counterparts in other countries. The first among these twinning partnerships was with the Government of New
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SUPPORTING PROJECT DEVELOPMENT The second stage of the process is the actual FINANCING IN THE PHILIPPINES selection of an advisor or consultant from the 1) Project Development and panel on a competitive basis. The selected Monitoring Facility (PDMF) consultant is then responsible for pre-feasibility, project preparation and transaction execution; PDMF is a revolving fund with a total investment of US $84 million5 from the Philippines Government probity advisory; and/or monitoring of project and US $18 million from the Australian Government implementation. through the ADB. The Japan International Cooperating Agency (JICA) has also provided 2) Infrastructure Preparation and Innovation assistance via studies and training courses. Facility (IPIF) PDMF is under the administration and management In order to fast-track the implementation of the of the Philippines PPP Center and its funding is an ‘Build Build Build’ program, the ADB has provided a integral part to the PPP Center’s operations and technical assistance loan of US $100 million for the at the core of the PPP Center’s ability to deliver on Philippines IPIF. its mandate. The aim of setting up the PDMF is IPIF is a technical assistance loan provided by to provide funding and facilitate preparation and the ADB that will directly support the Department monitoring of PPP projects. It provides financing of Public Works and Highways (DPWH) and to engage external consultants and transaction the Department of Transport (DoTr) to deliver advisors to assist implementing agencies in their more effective and higher quality infrastructure pre-investment activities for potential PPP projects projects. The benefits of this facility involve and develop a pipeline of viable, bankable projects. effective identification, analysis and planning for PDMF can also be tapped by implementing agencies infrastructure gaps in the roads, urban transport, for probity advisory during the bid process, and urban water, sanitation and flood management engagement of independent consultants to monitor sectors. This facility will enable the departments to the implementation of PPP projects. engage international expertise for the preparation Following the approval of assistance by the PDMF and implementation of complex and priority Committee for a specific PPP project, the PPP Center infrastructure projects. sets up a Special Bids Awards Committee, which is tasked with the selection of consultants, and 3) Project Development and Other Related the Project Study Committee/Project Monitoring Studies Fund (PDRS) 6 Committee/Project Implementation Committee , The PDRS fund can be utilised by the NGAs, GoCCs, which evaluate the deliverables of consultants and LGUs, and the state universities and colleges advisors, ensuring quality outputs. (SUCs) for the preparation of pre-feasibility studies, One of the key features of the PDMF is the feasibility studies, options analysis, value analysis, establishment of three panels of consultants (both formulations of sector plans and other related international and national firms) that are pre- pre-investment activities for infrastructure projects qualified under ADB procurement guidelines, namely that are reflected in the PIP, Regional Development the Panel of Project Preparation and Transaction Investment Program (RDIP), Three-year Rolling Advisory Consultants with 22 members, the Panel Infrastructure Programs (TRIP), or Master Plans. of Probity Advisors with six members, and the Panel of Independent Consultants with 10 members. There is a select set of criteria based on parameters ADB procurement guidelines ensure that there is such as sector relevance, total project costs, a quick and effective process for pre-qualification government entity, scale of impact, and project and selection of advisors. The actual process of the timeline, which are taken into consideration selection of consultants and transaction advisors is while screening, prioritising and evaluating a two-stage process. The first stage comprises of the eligible proposals for funding. Depending on the pre-qualification, selection and retention of a panel of above criteria, the NEDA Board Committee on consulting firms under an Indefinite Delivery Contract Infrastructure (INFRACOMM) will approve the final (IDC) facility for a duration of three years (which may vary each time depending on the discretion of the list of prioritised projects. PPP Center).
5 As of December 31 2018.
6 Project Study Committee for project preparation services, Project Monitoring Committee for probity advisory services, and Project Implementation Committee for Independent Consultant services
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3. Guidance for project preparation
Guidance PPP CENTER MANUAL OF OPERATIONS
Owner* PPP Center
Project Project preparation development stage
Details The PPP Center Manual of Operations is a guidebook that provides the guidelines for effective performance and completion of core tasks and responsibilities of the PPP Center. The manual mainly focuses on the PPP Center’s selected core processes, such as project preparation, management of the Project Development and Monitoring Facility (PDMF), project appraisal, monitoring and evaluation, and conducting training and capacity building activities for NGAs and LGUs in PPP project preparation and development.
Link for further details: https://ppp.gov.ph/transparency/ppp-center-operations-manual/
Guidance PDMF GUIDELINES
Owner PPP Governing Board
Project Project preparation financing development stage
Details The PDMF Guidelines provide the detailed process to be followed by the Implementing Agencies (IAs) in order to apply for PDMF support for project preparation activities, the process to be followed for the recruitment of consultants and management of consultants’ contracts funded by the PDMF and the overall management of the PDMF fund. This document specifies the project preparation activities and documents that can be prepared using the PDMF fund, and the IAs and projects that are eligible to obtain PDMF support.
Link for further details: https://ppp.gov.ph/pdmf-guidelines/
GUIDANCE ON THE IDENTIFICATION, SELECTION AND PRIORITISATION OF Guidance PPP PROJECTS
Owner PPP Governing Board
Project Project identification and prioritisation development stage
Details The guidance on the identification, selection and prioritisation of projects intends to institutionalise the criteria and process in the identification, selection and prioritisation of PPP projects using the Multi-Criteria Analysis (MCA) approach. This approach can be useful to determine potential PPP projects and ensure the generation of a credible list of projects that have a higher potential of implementation via the PPP route.
Link for further details: https://ppp.gov.ph/wp-content/uploads/2018/07/PPPC_GUIDE- Identification-Selection-Prioritization-20150325.pdf
* Guidance Owner is the governing authority which approves issuances for implementation.
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GUIDELINES AND PROCEDURE FOR THE FORMULATION OF THE 2017-2022 PUBLIC Guidance INVESTMENT PROGRAM (PIP)
Owner National Economic and Development Authority (NEDA)
Project Project identification and prioritisation development stage
Details The guidelines and procedure for the formulation of the 2017-2022 Public Investment Program (PIP) provides a framework and process for the formulation of the PIP, which is an accompanying document of the Philippines Development Plan (PDP) and the Results Matrix (RM). These guidelines provide the procedure to be followed and the parameters to be considered by the IAs to identify and prioritise their individual programs and projects (PAPs), and the role of the NEDA Secretariat and the Planning Committee (PC)/Subcommittee (SC) in the preparation of the final PIP.
Link for further details: http://www.neda.gov.ph/wp-content/uploads/2018/10/PIP-2017-2022- 01.pdf
GUIDELINES AND PROCEDURE FOR THE FORMULATION OF THE THREE-YEAR ROLLING Guidance INFRASTRUCTURE PROGRAM
Owner Department of Budget and Management, NEDA
Project Project identification and prioritisation development stage
Details The guidelines and procedure for the formulation of the Three-year Rolling Infrastructure Program are prepared to guide all the implementing agencies in the development and updating of the TRIP. This guidance document specifies the procedure and parameters to be considered by the individual IAs for identifying and prioritising their individual programs and projects. Using the consolidated TRIP, the program or project will be submitted to the DBM by INFRACOM for the determination of spending levels for the approval of DBCC and consideration in determining the agency’s budget ceilings. This shall then form the basis for the list of infrastructure PAPs that are to be included by DBM in the National Expenditure Program (NEP).
Link for further details: http://www.neda.gov.ph/policy-guidelines-and-procedures-for-the- formulation-of-the-three-3-year-rolling-infrastructure-program-trip/
Guidance GUIDELINES ON PUBLIC CONSULTATION AND ENGAGEMENT FOR PPP PROJECTS
Owner PPP Governing Board Philippines
Project Stakeholder consultation development stage
Details These guidelines institutionalise the consultation and engagement of the public, with the goal of improving transparency in the development and implementation of PPP projects and overall infrastructure development. This guidance stipulates the responsibilities of the individual participating institutions, such as the IAs and the PPP Center. It provides the process to be followed, the communication platform to be used and the time when the stakeholder consultations should take place.
Link for further details: https://ppp.gov.ph/wp-content/uploads/2018/07/PPPC_GUIDE_Public- Consultation-Engagement-20160621.pdf
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4. Project case example: Mactan - Cebu International Airport (MCIA) Passenger Terminal Building
PROJECT BRIEF QUICK FACTS Mactan Cebu International Airport (MCIA) is located on Mactan Island in the Cebu province of the Central Visayas area in the Philippines. VALUE Apart from being the second largest airport in (IN US $ MILLION) the Philippines in terms of domestic passenger traffic, it is also a gateway for various tourist 390 destinations in the Visayas Islands.
Cebu is among one of the fastest growing provinces in the Philippines and a major contributor to the nation’s economy. The Mactan-Cebu International Airport has emerged STATUS as a major gateway to the Philippines, with the passenger traffic more than doubling over the Operational past four years. The existing airport at Mactan was unable to cope with the surge in passenger traffic. As a result, in late 2014, India’s GMR Infrastructure and the Philippine company Megawide Construction took over the operations of the airport and were appointed to build PROJECT OWNERSHIP the second passenger terminal building. The construction of the second terminal began in MCIAA* and Department July 2015 and was completed within three years. of Transport (DoTr)
The existing terminal building, which has a capacity of 4.5 million passengers annually, had been operating at over-capacity, with almost seven million passengers using the airport facility in 2013. Upon completion of this project, SOURCE OF PROJECT the overall capacity of the MCIA will increase to PREPARATORY FINANCING 12.5 million passengers annually. Project Development and The Mactan-Cebu International Airport passenger terminal development was one of Monitoring Facility (PDMF) the priority projects of the new government after it made major infrastructure reforms post 2010. It was one of the few initial PPP projects that procured funding from the newly set up mechanism, the Project Development SUPPORT AGENCIES and Monitoring Fund (PDMF), for its project preparation and appointment of external PPP Center, NEDA consultants and experts.
*Mactan – Cebu International Airport Authority
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Institutional readiness and clearly demarcated 2008 MCIAA announcement regarding responsibilities for the institutions involved leads to terminal expansion plan to address the faster project preparation, evaluation and approval increasing passenger traffic Institutional readiness is considered to be a primary success factor for achieving quality project 2011 PDMF funds were provided and preparation within a timely manner. The implementing external consultant was hired for agency, in this case the Department of Transportation project preparation-related studies (DoTr), as the proponent of the project, was responsible for carrying out all the project preparatory 2012 Feasibility study was completed with activities. The PPP Center was responsible for assistance from international expertise financing the project preparation activities for the from India project through the newly set up PDMF mechanism. The NEDA Board was responsible for providing the 2012 Market sounding exercises were final approval for the project, once all the project conducted with the stakeholders preparation activities were satisfactorily performed. This clear demarcation of responsibilities, along with 2012 Project submitted to NEDA for final institutional readiness for implementation, ensured approval the commitment of the implementing agency in pursuing the project and hence, led to a faster 2012 Project was approved by the NEDA transition of the project from the preparation to the Board implementation stage.
2014 GMR Infrastructure secured a 25-year 2. Availability of dedicated financing mechanisms concession to develop and operate to carry out project preparation activities MCIAA Funding the project preparation activities is considered to be a major hindrance in carrying out 2015 Commencement of the construction of a high-quality full-fledged pre-investment study. the second passenger terminal Availability of a dedicated project preparation fund, in this case, the PDMF, helped the DoTr to utilise the 2018 MCIAA new passenger terminal expert services of external consultants in order to completely operational carry out the project preparation activities. In the case of complex and priority projects like the MCIA, the use of external consultants has helped the project to carry out the project preparation activities diligently and within the specified timelines, which contributed to the delivery of a high-quality PPP project. The integrated support package of the PDMF mechanism across the project’s whole lifecycle made the project preparation processes for the MCIA more efficient.
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3. Quality assurance mechanisms of the PDMF resulted in high quality and extensive project preparation Following the signing of the Technical Assistance Agreement (TAA) between the PPP Center and DoTr, the PPP Center initiated the selection of consultants for project preparation from its list of reputable consultants established under the PDMF. A Special Bids and Awards Committee (SBAC) was created to carry out the selection of consultants for the preparation of PPP projects. A Project Study Committee (PSC), consisting of representatives and technical experts from the PPP Center and the DoTr, was also created. It was mandated to review the Terms of Reference (ToR) and bidding documents for the selection of consultants. The PSC was also tasked to review and evaluate the consultant’s deliverables for the project preparation (e.g. the Feasibility Study Report) and to likewise endorse payments to the consultant. The quality assurance mechanisms helped ensure the completeness and correctness of project preparation documents.
4. The PPP Center performed stakeholder consultation on a large scale to provide high-grade services During the course of project development, the PPP Center, in partnership with the DoTr, undertook targeted market-sounding initiatives and consultations to gather insight, suggestions, opinions and comments from the stakeholders and other industry representatives on the proposed projects. Several public consultations were initiated by the PPP Center and the DoTr, wherein interested parties and stakeholders from local and international business communities were invited. In May 2012, a consultation program was conducted at the PPP Center, wherein senior representatives from international airports were also invited to participate.
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1. Noteworthy practices for project preparation
PUBLIC SECTOR CAPACITY PROJECT FEASIBILITY FOR PROJECT PREPARATION AND STRUCTURING
Specialised entity mandated to strengthen and Early-stage tariff validation by the Rwanda Utilities complement local government capacity Regulatory Authority (RURA) The Local Administrative Entities Development Agency The Rwanda Utilities Regulatory Authority (RURA) is (LODA), set up in 2013, supports local governments consulted at the feasibility stage on user tariffs and across various aspects of project preparation including the methods underlying their fixation and revision. harmonisation of central and local planning, project RURA’s recommendations are critical for the approval coordination and appraisal, financing project preparation of feasibility reports. studies, preparation of guidance documents and in capacity building of local entities. The project screening and PROJECT APPROVALS appraisal is performed by the Local Government Project AND QUALITY ASSURANCE Advisory Committee (LGPAC), a high-level committee with representatives from the Ministry of Finance and Economic Multi-factor project appraisal at the highest Planning, the Ministry of Local Government, other line levels of government ministries and key ministers from provinces. Rwanda has established high-level committees for project appraisal and monitoring, especially for PPP Establishment of Single Project Implementation projects. The Steering Committee (PPP SC) is the final Units (SPIU) in line ministries to complement approval authority of PPP projects and is composed public sector capacity of permanent members, including ministers of The Government of Rwanda, through the cabinet the Ministry of Finance and Economic Planning resolution of February 2011, facilitates the (MINECOFIN) and the Ministry of Infrastructure establishment of project implementation units within (MININFRA), the CEO of the Rwanda Development the contracting authority, staffed by external experts Board (RDB), and the head of the contracting authority (mobilised from the private sector) to augment as a non-permanent member. Appraisal checks project preparation capacity, quality assurance and include a suitability check by the RDB, an affordability marketability during project preparation. check by RURA, a fiscal assessment by MINECOFIN and an alignment check (with national priorities) by PROJECT IDENTIFICATION the Public Investment Committee (PIC). AND CONCEPT DEFINITION
Integration of multi-year project pipeline planning with PROJECT MARKETING AND the budgeting process STAKEHOLDER ENGAGEMENT All contracting authorities (both at the national and Clearly demarcated role of the RDB in project marketing local level) prepare and disclose three-year project The RDB is a specialised agency involved in Rwanda’s pipelines, which are integrated with the budgeting investment promotion through its investment process. This builds better ownership and sustainability promotion and implementation division. Within the of the multi-year planning process. RDB, another division, the Strategic Investment Division, currently functions as the central PPP Unit and assists A results-based planning framework for effective, the contracting authority with project preparation. continuous and transparent monitoring The RDB’s strong brand equity and relationship with The planning framework under the Seven-Year private investors helps in improving the marketability Government Plan provides an equitable focus on of projects. The RDB, being an empowered institution governance, justice and economic parameters with clearly directly reporting to the President of Rwanda, helps in defined outcomes, which are monitored continuously and streamlining decision-making for project preparation. disclosed annually on the government portal.
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2. Snapshot of project preparation activities
Rwanda has initiated several reforms to strengthen INSTITUTIONAL FRAMEWORK its project preparation landscape and to establish a At the national level, project preparation activities positive enabling environment to drive infrastructure in Rwanda are led by line ministries and their delivery. Rwanda has consistently updated its respective contracting authorities (CAs), with CAs legislative and regulatory framework to accelerate being responsible for the planning, structuring and the delivery of infrastructure projects. The National procurement of projects. Although Rwanda does Public Investment Policy 2009 was a major reform not have a centralised project preparation facility which helped improve efficiency and efficacy of to finance project preparation, an array of national public investment projects and increased alignment agencies and entities support the various aspects between public and private investment initiatives. of project preparation, including the Ministry of Although recent and yet to be fully tested in terms Finance and Economic Planning (MINECOFIN), the of implementation, Rwanda has also strengthened Public Investment Committee (PIC), the PPP Steering its regulatory framework for PPP project preparation Committee (PPP SC), the Rwandan Development with the adoption of the PPP Law in May 2016, and Board (RDB), the Regulatory Authority (RA), the Local PPP Guidelines in June 2016. Administrative Entities Development Agency (LODA), the Local Administrative Entities Development Agency Rwanda has also recently adopted a comprehensive (LGPAC) and the District Council. National Investment Policy1. The objective of this policy is to achieve the country’s strategic A brief overview of the role of each of the stakeholders development goals by transforming the National involved in project preparation is summarised below: Public Investment Policy into a National Investment • MINECOFIN was formed in 1997 by the merger of Policy, which addresses both public and private the Ministry of Finance and Ministry of Planning investment. It is intended to lay the groundwork for balancing new public investment projects and to improve coordination between the functions of potential divestiture needs with options to strengthen finance and planning. MINECOFIN is responsible for private sector participation. The Government of preparing the long-term vision documents, medium- Rwanda has also prepared standardised documents, term strategies and annual plan. It is also an apex tools, and templates for use and reference in the PPP agency playing a critical role in project appraisal project cycle process, complementing the PPP policies and approval, including activities such as (i) fiscal and legislation. risk assessment and (ii) alignment with national priority plans through the Public Investment 2 As per the Global Infrastructure Hub’s InfraCompass , Committee (PIC)4. During the project preparation total investment in infrastructure in Rwanda stood at cycle, PIC evaluates projects twice; it approves US $2.294 billion in the last five years, with US $1.386 the initiation of the feasibility study and conducts billion (60% of the investment) contributed by the the feasibility report. PIC is chaired by high-level private sector. 12 PPP projects involving an estimated representatives from MINECOFIN and key spending US $814 million in investment have reached financial ministries. Each sector ministry has a planning closure since 19903.The HQ Peat-fired Power Plant department that works closely with the National was the biggest project in Rwanda’s history at US Planning, Development and Research Department $345 million and reached financial closure in 2017. in MINECOFIN to ensure sector prioritisation. MINECOFIN is assisted by an in-house Single Project Management Unit.
1 Draft National Investment Policy 2017, prepared by MINECOFIN
2 https://infracompass.gihub.org/ind_country_profile/RWA
3 http://ppi.worldbank.org/snapshots/country/rwanda 4 PIC is housed within MINECOFIN.
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• The Rwanda Development Board (RDB) was SINGLE PROJECT MANAGEMENT UNIT established in 2009 to coordinate and promote – COMPLEMENTING PUBLIC SECTOR national economic development in the country. It CAPACITY IN PROJECT PREPARATION is a specialised agency, which serves as a central PPP Unit through its Strategic Investment Division The Government of Rwanda, through (SID). The RDB’s role also includes the preparation the cabinet resolution of February 2011, facilitated the establishment of Single Project of PPP guidelines and undertaking an independent Management Units (SPIUs) in line ministries screening (pre-feasibility study) for suitability for and public agencies. SPIUs create capacity delivery as a PPP. In the feasibility stage, it forms a for the design and implementation of projects project-specific technical committee to review the earmarked for fast-track achievement of feasibility study. It assists the CA throughout the targets in the national vision and sectoral overall project lifecycle by assisting with project strategies. The SPIUs, staffed by external preparation, marketing the project, functioning as experts often from the private sector, seek a lead negotiator in PPP project agreements, and to augment project preparation capacity, following up on the realisation of investments. strengthen quality assurance and improve Thus, the RDB is the highest investment promotion marketability and information dissemination authority in the country. during project preparation. • PPP Steering Committee – The PPP Law The SPIUs collaborate with other institutions, designates the PPP Steering Committee development partners and other consultants responsible for the approval and oversight of a PPP to prepare proposals, to prepare plans for project. It is the final approval authority for PPP project implementation, to plan budgets and to projects. The Steering Committee is composed negotiate local funds etc. The SPIU staff may of permanent members (Ministers of MINECOFIN be individual consultants or firms, and they and MININFRA, and the CEO of the RDB) and non- help to implement systems and processes to permanent members, including the head of the ensure effective project management. SPIUs contracting authority. are required to conduct regular programmatic At the local government level, the Ministry of Local and financial supervision of the projects Government (MINALOC) acts as the apex ministry and to ascertain if project activities are aligned oversees the functioning of local authorities. Local with the approved plan, budget lines and governments in Rwanda are structured across four timeframes. The SPIUs are also vested with tiers: 30 districts (Akarere), 416 sectors (Imerenge), the role of engaging with external stakeholders 2,148 cells (Utugari) and 14,837 villages (Imudungu). (including multilateral development banks The districts are responsible for identifying and (MDBs), financial institutions and private sector monitoring projects according to strategic guidelines players) and engaging in timely information set by the ministries. The District Council is the key dissemination, including through participation decision-maker for projects in respective districts and in seminars and consultations. the final approval authority for locally-funded projects. While the project preparation and implementation activities are largely driven by the respective local governments, LODA acts as an important intermediary in complementing local government capacity. Further, the Local Administrative Entities Development Agency (LGPAC) advises on the quality and relevance of ongoing and new projects that meet the requirements for implementation at the local level. With regards to PPP projects, LGPAC is involved at the project identification and screening stages. This committee is chaired by the central government entity MINECOFIN.
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LODA – AGENCY TO SUPPORT THE TECHNICAL quality of local government projects, LODA also CAPACITY OF LOCAL GOVERNMENT ENTITIES IN establishes a Validation Committee, or a working PROJECT PREPARATION group, with staff from local contracting authorities The Local Administrative Entities Development to validate the results of the feasibility study before Agency (LODA), set up in 2013, is an agency within it is presented for review. MINALOC. It acts as an intermediary to support 3) Project preparatory financing assistance –LODA’s the preparation and implementation of local funding is largely driven by budgetary grants government projects. It also serves as a technical channelled through MINALOC. It receives grants secretariat of LGPAC to advise on the quality of under specific multilateral programs and provides infrastructure projects. Among the multitude preparatory financing for national of roles played by LODA in complementing priority projects. and strengthening local government capacity, noteworthy practices include: 4) Project coordination and appraisal – LODA, in collaboration with MINECOFIN, carries out an initial 1) Harmonisation of central and local planning – screening of all submitted projects and presents LODA organises consultations among central and its findings and recommendations to LGPAC and local governments to coordinate and harmonise District Councils for final approval. For projects districts’ capital projects with sector ministries. In to be funded using the central budget, LODA, in addition, new and ongoing development projects association with MINECOFIN, holds consultations are reviewed by LODA and presented to the Local with each district to finalise the budget and arrive at Government Projects Advisory Committee for a final allocation for each district. The projects for further guidance. All local projects are reviewed which financing is approved are presented to LGPAC by a joint technical team comprised of MINALOC, for quality assurance and then a prioritised list is LODA, MINECOFIN and LGPAC to ensure quality. submitted to the District Council for final approval.
2) Support in feasibility studies – LODA publishes 5) Undertaking capacity building – LODA undertakes simplified feasibility assessment guidelines for capacity building for local administrative entities smaller local government projects with a value involved in project preparation, in assistance below US $1 million. It also publishes templates with MDBs, on issues such as the environmental with a standard reporting format for the detailed and social framework, land acquisition and feasibility study. LODA provides the framework for resettlement, and other topics relevant for project the Environmental and Social Impact Assessment management. (ESIA) for local government projects. To assure the
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PROJECT PREPARATION LANDSCAPE The pre-feasibility study is carried out internally Project preparation activities are decentralised in by the CA and the screening of the pre-feasibility Rwanda, with the line ministry and their agencies study is undertaken by PIC at the central level and responsible for project preparation at both the federal LGPAC at the local level. In the case of PPP projects, and sub-national level. A snapshot of the project the pre-feasibility studies are submitted to the preparation landscape is summarised below: RDB for a PPP suitability check and then the RDB’s recommendation is submitted to PIC for approval to Project conceptualisation and planning. Project conduct the full feasibility study. The request for the planning in Rwanda is guided by strategic and vision full feasibility report is submitted by the CA according documents, including the National Vision 2020, to MINECOFIN’s standard planning and budgeting the Economic Development and Poverty Reduction guidelines and the full feasibility report is screened by Strategy (EDPRS 2), the National Medium-Term PIC at the central level and LGPAC at the local level. Strategy for Development, sector-specific strategic Project preparation is largely financed through annual plans, and the government development program budgetary allocations or is supported by specific MDB- (Seven-year Government Program). The projects are led programs (including African Development Bank identified by the Contracting Authorities (which may and World Bank programs). be line departments and/or state-owned entities). In the course of the budget planning and approval Project approvals. Project approvals follow processes, the CAs submit projects for a three- two distinct steps according to the type of year horizon, and the project pipeline prepared is project procurement: integrated into the national-level three-year investment • In the case of public investment projects, the program – the Public Investment Program (PIP). The project approvals are integrated as part of the project pipeline, after the due approval process, is planning and budgeting exercise for central also updated in the Public Investment Management government investment. The projects are System, which serves as a credible pipeline of projects assessed twice by PIC or LGPAC during the project ready for feasibility or investment funding. preparation lifecycle; first, by conducting a full Project studies and structuring. The National feasibility study and second, in order to proceed Investment Policy 2017 provides a unified process of with the tender. For sub-national projects, LODA initiation and preparation of project studies. Project acts as a technical secretariat to LGPAC and requests for studies (pre-feasibility and feasibility) assists in screening projects. The findings of the are submitted with a project profile document (PPD), screening are submitted to LGPAC, which advises which includes basic project information, and an on investment priorities to the District Council additional concept note describing the design of the (which has the authority for final project approval). requested project (full-feasibility or investment) to PIC. • In the case of PPP projects, the projects are Projects go through screening and appraisal based on submitted to the RDB for evaluation and registration the size of investment, as follows: in the PPP database. RDB forms a project-specific • Screening only is undertaken for projects below Technical Committee (TC) for review of the full 750 million Rwandan francs (US $840,0005); feasibility report. The TC comprises representatives from the RDB, a project officer from the CA, • Full feasibility only is conducted for projects representatives from MINECOFIN (to review and between 15 billion and 750 million Rwandan francs provide approvals on fiscal commitment and (between US $17 million and US $840,000); and contingent liabilities), RURA (which advises on tariffs • Both pre-feasibility and feasibility studies are where user tariffs are to be used), and other relevant conducted for projects above 15 billion Rwandan ministries and agencies, including the Ministry of francs (above US $17 million). Justice. Further, the PIC also evaluates the feasibility report from an economic feasibility and strategic investment standpoint. Recommendations from the TC and PIC are submitted to the PPP SC for projects which are to be delivered using the PPP structure. In the case of local level projects, these are assessed by LGPAC twice, both at the pre-feasibility and full feasibility stage.
5 Exchange rate: RWF 1 / US $0.0011 as of 7 December 2018
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3. Guidance for project preparation
Guidance PPP GUIDELINES
Owner Rwandan Development Board (RDB)
Project Project preparation and approval development stage
Details The PPP manual provides an overview of the procedures to be followed and approvals required for implementation of a PPP project. It serves as a guide to the public and private sector stakeholders on the institutions involved in the project preparation process and their roles, and also the key steps within the project documentation that must be followed by each entity.
To ensure quality in project preparation and the standardisation of project documents, it also provides i) the template for the pre-feasibility report, ii) a detailed methodology of the PPP project screening tool used by the RDB to assess PPP suitability, iii) a template for the feasibility report, iv) a checklist for the feasibility study, v) a model template for testing the impact of Fiscal Commitment and Contingent Liability (including the format for comparison between PPP and traditional procurement provision), and vi) a long-term fiscal planning tool.
Link for further details: http://rdb.rw/wp-content/uploads/2018/08/PPP-Guidelines.pdf
Guidance GUIDELINES FOR COMMISSIONING AND MANAGING FEASIBILITY STUDIES
Owner Local Administrative Entities Development Agency (LODA)
Project Project preparation and approval for local government projects development stage
Details The guideline is published for local government entities involved in the preparation of feasibility studies. The documents primarily enhance the quality of local development projects at the district level. The guideline details (i) the concept of feasibility studies, (ii) the detailed appraisal dimension for feasibility studies, (iii) guidance on the scope and content of a feasibility study, and (iv) practical example(s) of conducting a simplified feasibility assessment aiming at basic services provision, and a more comprehensive feasibility study for a revenue generating project.
Link for further details: http://loda.gov.rw/fileadmin/user_upload/documents/2014_PRO/ Documents/1_LODA_FS_Guidelines_2015.pdf
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4. Project case example: Kigali Bulk Water Supply Project
PROJECT BRIEF QUICK FACTS The Kigali Bulk Water Supply project is one of sub-Saharan Africa’s first water PPPs. VALUE (IN US $ MILLION) The project aims to deliver around 40 million litres of treated groundwater per day (40% of Kigali’s daily water demand) extracted from 60* the Nyabarongo River to Kigali city. The PPP project company (the SPV) shall sell water to the national water utility, the Water and Sanitation Corporation (WASAC), which will distribute water to end-users. The project is aligned STATUS with the Government of Rwanda’s “Economic Development and Poverty Reduction Strategy” with Under construction a commitment to achieve universal access to water by 2020.
In September 2010, the Government of Rwanda (GoR) retained the International Finance Corporation (IFC) as lead advisor PROJECT OWNERSHIP to develop and structure the project, and to handle the competitive tendering of the project. Ministry of Infrastructure Subsequently in 2011, the Public-Private Infrastructure Advisory Facility (PPIAF) provided institutional strengthening and capacity building around the transaction, to ensure GoR’s ability to manage the project over the long-term. Although the project was successfully bid out in October SOURCE OF PROJECT 2014, financial closure took time and was PREPARATORY FINANCING completed only in November 2017. As the first of its kind in Rwanda, there was little precedent IFC (project studies), PPIAF in terms of templates and benchmarks etc., (capacity building) resulting in this long cycle time between award and financial closure.
The project is a tripartite contract involving the stakeholders WASAC, Ministry of Infrastructure (MININFRA) and the SPV Kigali Water Limited (incorporated by Metito Utilities Limited). The SUPPORT AGENCIES project is structured as a 27-year PPP Build- WASAC/EWSA, IFC, external Operate-Transfer (BOT) contract with a 2.5-year construction period. The SPV Kigali Water advisors (Mott MacDonald, Limited will be responsible for the design, Green Clean) construction, operation and maintenance of the new treatment plant. It will also develop the water transmission infrastructure. However, the responsibility to maintain and operate the water distribution network and the sale of water to end-users will remain with WASAC, which is the sole off-taker of water from this project.
* Source: Private Participation in Infrastructure Database, the World Bank
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Dedicated source of funds and transaction advisor 2008 Economic Development & Poverty to support project preparation Reduction Strategy 2008 envisaged In September 2010, the GoR retained IFC as 100% water supply to all by 2020 transaction advisor to assist in the preparation, design, and implementation of private sector Sep-10 IFC was hired as transaction advisor to participation in the project. IFC’s transaction assist the CA in project preparation advisory was supplemented with support from the Infrastructure Development Partnership Fund Jan-11 Technical team appointed to undertake (DevCo), and the Public-Private Infrastructure Advisory project studies Facility (PPIAF). IFC hired Mott MacDonald Ltd. as the technical consultant for the assignment. The 2011 PPIAF was engaged to undertake technical team brought in a pool of experts across institutional capacity building of the multiple domains including a water supply engineer, Energy, Water and Sanitation Authority a hydrologist, a hydrogeologist, a water treatment (EWSA) ahead of project procurement specialist, an environmental expert, a sociologist, a PPP support expert, a PPP reviewer and a legal and Oct-13 Decision to split (EWSA) into two public regulatory specialist. The external experts were also companies: Rwanda Energy Group Ltd supported by a liaison officer and local support team (REG) and the Water and Sanitation manager based out of Rwanda. The IFC, along with Corporation Ltd (WASAC) the consultants, carried out the assignment in two phases: Dec-13 RFQ stage undertaken • Phase 1: Detailed due diligence to assess the feasibility of the project and inform the preparation Aug-14 WASAC was established under Law N° of a Strategic Options Report (SOR) in Phase 2. This 87/03 dated August 2014 to manage stage also included the identification of the most water and sanitation services in appropriate location for the project components, Rwanda as well as a demand assessment to determine the size of the plant. During the due diligence Oct-14 RFP undertaken and preferred bidder stage, the detailed legal, financial, technical and selected environmental assessments of the project were conducted to assess the feasibility of the proposed Mar-15 Concession agreement signed project and to inform the preparation of a Strategic Options Report (SOR). The SOR included an Nov-17 Financial closure achieved assessment of water supply and demand to ensure that an optimal solution for the long-term needs Jan-18 Construction commenced of Kigali was identified, and recommended a PPP BOT structure, which best suited the development Jan-20 Scheduled commercial operation of the objectives of the government, while ensuring the project bankability of the transaction.
• Phase 2: Detailed project structuring and the competitive selection of investors to implement the PPP. This involved consultations with prequalified bidders, preparing tender documents, preparing responses to bidders’ queries and issuing bid bulletins.
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2. Institutional reforms and capacity building to • Phase 2: GoR also introduced several initiatives ensure project sustainability to empower the newly formed institution under The preparation of the Kigali Bulk Water Supply the PPIAF program, including the development of project also reflects the need to streamline public a strategic business plan and an investment plan. sector institutional design, not just to meet the project This enabled the successful tendering of the Kigali objectives but also from a strategic perspective to Bulk Water Supply project, providing comfort to meet the National Vision. Undertaking the complex potential bidders that the GoR was committed to the task of revamping the water supply network in a sustainable provision of water and sanitation services, major urban centre required clear accountability and and that WASAC would be able to serve as an effective operational flexibility from the CAs. The structure off-taker and counterparty to the project. PPIAF’s of EWSA was found to be unviable to undertake a institutional strengthening and capacity building complex PPP project of this scale. To increase the support helped create a conducive environment for transparency and quality of operations, GoR decided the development and tendering of the Kigali Bulk to split EWSA into two separate utilities – the Rwanda Water Supply project. Energy Group Ltd. (REG) and the Water and Sanitation Corporation Ltd. (WASAC), with WASAC tasked with 3. Alignment with the national vision helps to drive the management of the project. project ownership at the highest level The national vision and strategic plan – Vision The IFC team also mobilised funding from PPIAF to 2020 and the Economic Development and Poverty support capacity building for the water utility and the Reduction Strategy 2008 (EDPRS) - clearly identify water sector reform process. PPIAF has provided two inadequate access to safe drinking water as one of phases of support to help establish and strengthen a the key reasons for poverty in Rwanda and outline credible off-taker for the Kigali Water Supply Project: the objective for targeting universal access to water • Phase 1: Institutional support to the Energy, Water, and sanitation. The Kigali Bulk Water Supply project and Sanitation Authority (EWSA) to strengthen its is aligned to the national vision. The project is also ability to oversee and implement the Kigali Bulk one of the first PPP projects in bulk surface water Water Supply project. This included i) recommending supply in sub-Saharan Africa. The uniqueness of the an organisational structure that would allow EWSA project and its alignment with the national vision to improve its financial, technical, operational and has ensured project ownership at the highest levels commercial performance; ii) technical support of government, which was a critical success factor to EWSA to develop a more comprehensive in project preparation. The RDB and WASAC, along understanding of the distribution network and its with IFC, were able to create an environment of close operational performance, in order to provide strategic coordination between the government, lenders, private recommendations to improve network monitoring and partners and other stakeholders, which was essential reduce the non-revenue water rate; and iii) capacity in determining the project’s scope, alignment with building for government officials to improve their broader water access goals, and ascertaining water understanding of PPPs. affordability implications.
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4. Flexibility in project structure and risk transfer • Mitigating the fiscal risk of the project –The The project financing structure continuously original scope of the project included production evolved during the project development stage to and distribution infrastructure such as pumping accommodate changes in the project and cost stations, reservoirs and piping, and other structure. Some of the key challenges have been infrastructure to deliver clean water to the summarised below: local population. In a bid to reduce the fiscal impact of the high infrastructure construction • Managing the credit risk of WASAC – One of the key cost, the project structure was revised, with the challenges faced was to manage the credit risk of concessionaire responsible for bulk water supply the newly reorganised entity WASAC as an off- and transmission, and WASAC responsible taker, which had implications for its credit standing. for distribution infrastructure (with a separate WASAC’s credit risk was mitigated by structuring concessional loan from the AfDB). multiple layers of cash reserves to improve the credit profile of the project.
• Managing the tariff impact on end-users – The involvement of DevCo, the specialist PPP advisory facility operating through the Private Infrastructure Development Group (PIDG), and implemented by the IFC, provided funding to help structure the transaction and its competitive tender. The Emerging Africa Infrastructure Fund (EAIF) worked with Metito Utilities Ltd. (Metito) to refine the financing model, and they identified a need for subsidies to make the project viable for all parties — EAIF and the African Development Bank (AfDB) as commercial lenders, Metito as equity investor, and the off-taker with its tariff affordability objectives. As a result, the PIDG Technical Assistance Facility provided crucial viability gap funding to reduce upfront costs and allow the government to expand the number of people connected to a reliable water supply without raising tariffs. This combined support gave the developer, Metito, and the Rwandan Government the necessary assurance and security to proceed with an innovative plan that was affordable for all parties, including end-users.
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT APPROVALS ENVIRONMENT AND QUALITY ASSURANCE
Establishment of active financial markets and a Strong quality assurance for planning and monitoring vibrant ecosystem of quality transaction advisers of large infrastructure projects under BFI
The widening of financial markets and the deep The Budget Facility for Infrastructure (BFI) is a reform expertise of financial stakeholders in managing to the budget process that supports the execution of infrastructure investments has been one of the national priority projects by establishing specialised structures, procedures and criteria for committing critical factors for success in project preparation. fiscal resources to public infrastructure spending. The high-quality standards prescribed by the financial community have also facilitated the availability of The objective of the facility is to address a steady pool of transaction advisers for project shortcomings in the planning and execution of preparation. infrastructure projects and help the government to build a pipeline of projects, through robust project appraisal, effective project development and PROJECT IDENTIFICATION execution, and sustainable financing arrangements. AND CONCEPT DEFINITION
Multi-dimensional and integrated framework Strong gatekeeping and good practice guidance by South Africa’s planning approach seeks to integrate National Treasury geospatial planning with medium-term sector and National Treasury performs stringent checks at departmental plans that are contextualised in the key stages of the project preparation process. The medium-term expenditure framework. Infrastructure National Treasury’s PPP manual provides a systematic development comes under the National Development guide to project preparation, which has become a best Plan, a long-term multi-sectoral plan, along with practice guide for PPP practitioners across Africa. The the National Infrastructure Plan, which aims to National Treasury provides comprehensive guidance coordinate high priority projects in a geospatial to drive quality assurance in project preparation. Its context. Infrastructure implementation is provided portal serves as a single point of disclosure for all of by the medium-term plans such as the User Asset the guidance documents. Management Plan, Annual Performance Plans, Five- Year Strategic Plans, the Infrastructure Programme Restructuring of the PPP unit and empowerment Management Plan (IPMP), and the Medium-Term of GTAC as an effective technical and financial Expenditure Plan (MTEF). Implementation of the intermediary for project preparation pipeline is closely monitored and reported by the GTAC’s role as an independent appraisal and advisory National Treasury and the Government Technical Advisory Centre (GTAC). unit has strengthened the independence of and transparency in the project approval process in South Africa. The dedicated project development account managed by GTAC has also ensured the availability of quality Project Officers and a Transaction Advisory team for driving quality of project preparation.
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2. Snapshot of project preparation activities
South Africa has adopted a systematic approach The National Treasury of South Africa leads to project planning and preparation that has infrastructure financing policy and expenditure delivered great success in crowding-in private management at the national level. It is involved in investment in infrastructure. long-term project planning, such as the National Development Plan 2030, and appraisal and treasury South Africa plans and executes capital projects approvals of individual projects. The National Treasury exceeding ZAR 300 billion (US $22 billion) on an also leads on policy formulation and guidance on annual basis. The successful implementation and project preparation, and monitors progress of GCAs management of the projects are due to a strong through their Annual Performance Plans. foundation in the country’s project preparatory environment. Private investment in infrastructure The PPP and Transaction Advisory Unit of GTAC, an emerged in the second half of the 1990s with the agency of National Treasury, supports PPP project appointment of an inter-departmental task team to preparation and implementation in South Africa. create an enabling environment for PPPs (in 1997). GTAC aids with public finance management through South Africa has emerged as a successful model professional advisory services, program and project for PPPs because of the effective implementation of management, and transactional support. GTAC also marquee projects and the establishment of a sound provides support to the National Treasury in the PPP-specific regulatory framework to manage risks appraisal of capital projects, including PPPs, prior to and secure returns for private investors. treasury approvals.
INSTITUTIONAL FRAMEWORK PROJECT PREPARATION LANDSCAPE Project preparation activities in South Africa are largely South Africa follows a structured approach to driven by the Government Contracting Authorities project preparation, championed largely by the (GCAs), which include individual line ministries, line departments and agencies. The focus of sectoral agencies, and state-owned enterprises the Government of South Africa continues to be (SOEs). The GCAs prepare their long-term project on promoting solicited proposals. In the case of plans, which provide an active pipeline of projects unsolicited proposals (USPs), South Africa’s National for implementation. These include the Strategic Plan Treasury USP framework accepts USPs for projects (five-year plan), the Annual Performance Plan and the featured on the government’s list of priority projects Annual User Asset Management Plans. The GCAs but makes innovation a core element of its evaluation are guided and assisted in project preparation by criteria. For a USP to be considered, it must involve national level public institutions, such as the National innovative design, project development and/or Treasury, the Presidential Infrastructure Coordinating management, or a new and cost-effective method of Commission (PICC) and the Government Technical service delivery. A snapshot of the project preparatory Advisory Centre (GTAC). landscape is summarised below:
As per the cabinet’s mandate, the PICC plans and Project conceptualisation and planning. The New coordinates the National Infrastructure Plan (NIP). Growth Path and the National Development Plan The NIP presents the PICC’s spatial mapping of (NDP) 2030, prepared by the National Treasury, infrastructure gaps and development priorities serve as vision documents, while the National through 18 Strategic Integrated Projects, each Infrastructure Plan (NIP), championed by the PICC, comprising several infrastructure components and focuses on geospatial planning and coordination programs, to support economic development and amongst various government agencies to fast-track address service delivery in the poorest provinces. strategic projects. The line departments prepare five- The PICC is driven by the highest level of political year strategic plans and annual asset management office, which helps bring in a greater degree plans, which form the core planning documents of harmonisation in perspective planning and and inputs to the budget document. Based on the coordination across the government. project plan, the National Treasury finalises a three- year Medium-Term Expenditure Framework (MTEF), which serves as the guidance document on the government’s fiscal situation.
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Project feasibility studies and structuring. Project economic analysis (Cost-Benefit Analysis (CBA) preparation is largely performed by the line and cost-effectiveness analysis), risk assessment, departments. The line departments may be supported sensitivity analysis, and review of the implementation by international development partners and the and procurement plans. private sector. The National Treasury’s Standard The project guidance and approval process for Infrastructure Procurement and Delivery is structured according to the following Management (SIPDM) provides the benchmark for project categories: the preparation of concept notes, and pre-feasibility or feasibility reports. ––Centrally-funded projects (as outlined in the capital planning guidelines); Project appraisal and review. The project appraisal and review are done through a multi-institutional ––Large and/or strategic projects (as outlined in framework to ensure high quality project preparation. the Budget Facility for Infrastructure (BFI)); and The project appraisal process covers financial analysis ––PPP projects (as outlined in the PPP manual). (lifecycle cost and Internal Rate of Return (IRR)),
BUDGET FACILITY FOR INFRASTRUCTURE – for implementation. The facility prepares a REFORM TO SUPPORT NATIONAL recommendation report for the Medium-Term PRIORITY PROJECTS Expenditure Committee (MTEC) and the Ministers’ The Budget Facility for Infrastructure (BFI) is Committee on the Budget (MINCOMBUD), a reform to the budget process that creates a which decides on the allocation of budget. The specialised institutional framework and processes project sponsor is also engaged on the draft to support the planning and implementation recommendations report before it is presented to of national priority projects. The facility is MINCOMBUD. established and managed jointly by the National The objective is to build a pipeline of infrastructure Treasury, the Presidential Infrastructure projects and programs, where approvals are Coordinating Commission (PICC) secretariat, and sought at each stage of project development, the Departments of Planning, Monitoring and starting with initial concept documents. The Evaluation (DPME) and Economic Development process of project identification is linked to the (EDD). The facility has also established the Joint budget preparation process. Under the BFI cycle, Technical Committee (JTC), comprised of senior project proposals are invited at different levels officials from the National Treasury, the PICC of project development (concept, pre-feasibility, secretariat and the DPME, which manages the feasibility) for review. Project sponsors will be detailed technical assessment process. notified of the decision at each gate.
Projects submitted to the facility undergo a For the financial year FY 2018-19, the BFI received rigorous independent appraisal on their technical 64 large infrastructure project submissions. merits. The technical parameters of assessment Of these, 38 projects that met submission include value-for-money, socioeconomic requirements were assessed. rationale, affordability, risk profile and readiness
The Treasury follows a four-stage review process for Where the project has been supported by one of the PPP projects at the following stages: project preparation facilities (PPFs), then it would also need to be approved by the respective project facility • Completion of the feasibility study (Treasury donors prior to the treasury approvals. approval I);
• Preparation of the bid documents (Treasury approval IIA);
• Evaluation of bids (Treasury approval IIB); and
• Conclusion of negotiations (Treasury approval III).
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Financing project preparation. Financing for project STATE-OWNED ENTERPRISES – LEADING preparation comes from three sources: QUALITY ASSURANCE IN INFRASTRUCTURE PLANNING • Budgetary allocation within the respective line agencies and SOEs, including SANRAL, TRANSNET, State-owned enterprises (SOEs) are independent PRASA, ESKOM, SAFCOL, Trans-Caledon Tunnel entities partially or wholly owned by the government. Authority, Rand Water, and DBSA. South Africa is reported to have over 700 SOEs that together account for an estimated 76% of the • Government budget-supported project preparation country’s infrastructure investment. Some of the facilities. These include the Project Development major SOEs include SANRAL (roads), TRANSNET Account, which sits under the National Treasury to (rails, ports and pipelines), PRASA (passenger support the preparation of PPP projects targeting railways), ESKOM (power), ALEXKOR (mining), private investment. In addition, there is the newly DENEL (military equipment), SAFCOL (forestry), created Budget Facility for Infrastructure (BFI), Trans-Caledon Tunnel Authority, Rand Water, which supports the execution of national priority and the Development Bank of Southern Africa projects by establishing specialised structures, ((DBSA) project financing). These SOEs promote procedures and criteria for committing fiscal a programmatic approach to project preparation, resources to public infrastructure spending. Often although fiscal challenges and credit limitations public entities in South Africa have not adequately within SOEs have constrained infrastructure budgeted for project planning and preparation. investment more recently. Therefore, these facilities seek to bridge the SOEs in South Africa have created internal capacities funding gap. The aim is to support quality public and strong quality assurance standards for project investments through robust project appraisal, approval, which has helped in scaling up project effective project development and execution, and delivery. For example, TRANSNET is a freight and sustainable financing arrangements. logistics company responsible for pipelines, ports, and rail transport infrastructure and operations in • Multiple other project preparation facilities at the South Africa. TRANSNET has established a multi- national and regional levels. For example, the year planning framework (Long-term Planning Infrastructure Investment Programme for South Framework – LTPF), which defines TRANSNET’s Africa1 (IIPSA) is a collaboration between the long-term port, rail and pipeline infrastructure Government of South Africa and the European capacity investment plans. The LTPF is based Union (EU) to promote key infrastructure projects in on a 30-year integrated freight demand forecast South Africa and the Southern African Development (Freight Demand Model, Transportation Model, and Community (SADC) region. Similarly, the DBSA Market Share Model) and is closely aligned with the Project Preparation Fund, which is sponsored by government’s National Development Plan. This plan DBSA under the National Treasury, finances the is updated on an annual basis. Project preparation is preparation of bankable infrastructure projects in guided by extensive review processes across four South Africa and the SADC region. Beyond this, major phases: there are other autonomous international project • FEL 1 – Master planning and concept development; preparation facilities that contribute to project preparatory financing in South Africa. • FEL 2 – Pre-feasibility study; • FEL 3 – Feasibility study and detailed engineering; • FEL 4 – Procurement and construction management. The detailed guidelines of each phase are provided in
the ‘Project Life Cycle Process Gate Review Manual’. 1 The Development Bank of Southern Africa (DBSA) has been While South Africa has been facing some fiscal appointed as the Secretariat and Fund Manager to implement challenges driven by the credit constraints of SOEs, the IIPSA program and invites project proposals from eligible public entities and private entities with a public service mission to the process and service delivery model framework apply for IIPSA Grant Funding for the financing of infrastructure established by the SOEs is an efficient “model for investment projects in support of long-term financing by infrastructure delivery’’. participating DFIs. This funding can take the form of technical assistance or direct investment grants. Although the DBSA is the implementing agent, an IIPSA Project Steering Committee that comprises the National Treasury, Department of Economic Development, Department of Public Enterprises and the Department of International Relations and Cooperation will make the final funding decisions regarding the IIPSA program.
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GTAC AND THE PROJECT DEVELOPMENT The project officer is then procured, followed by ACCOUNT (PDA) FACILITY the procurement of the transaction advisor. A In 2012, the Government of South Africa split Project Steering Committee (PSC) is thereafter the regulatory functions of the PPP Unit (in created, composed of senior departmental the National Treasury) from its advisory role, officials, particularly those who will ultimately be involved in implementing the PPP. One of the tasks which was then transferred to the Government of the transaction advisor is to undertake capacity Technical Advisory Centre (GTAC). Since this building with the departmental PSC members so transfer of responsibilities, GTAC has been that they will be able to implement the project providing technical support and advice to national once approved. The transaction advisor will then and provincial departments (or municipalities) conduct a feasibility study, the elements of which in getting a PPP project through all stages of include: a needs analysis, an options analysis, Treasury approvals (or for municipalities – “Views project due diligence, a value assessment, and an and Recommendations”); while the Infrastructure economic valuation and procurement plan. Upon Finance Unit in the Budget Office is now conclusion of the feasibility study, it is submitted responsible for the regulatory function and for to the Budget Office for approval. recommending project approvals to the Deputy Director General of the Budget Office. Apart from providing project development funds, one of the main objectives of the PDA facility is The Project Development Account (which is a to drive the public entities to define medium-term revolving fund) is a dedicated project preparation planning objectives and earmark funds for planning facility under the National Treasury utilised by and preparation. The PDA facility has supported GTAC to finance technical assistance for all project preparation activities in more than 33 projects including PPPs, NDP projects etc. These projects across multiple sectors. Examples of functions include technical consulting services, projects where PDA funding was used are specialised procurement support for high impact listed below: government initiatives and advice on the feasibility of infrastructure projects. In all instances of PPP- • The National Department of Health–Biovac vaccine distribution program. In South related financing support, funds are paid to advisors Africa, the provinces are responsible for the in accordance with the terms of the contract distribution of all pharmaceuticals, including between the implementing authority and the advisor. vaccines procured for them by the National In non-grant funding instances, disbursed funds Department of Health. Vaccines are particularly will be recovered from the successful private party vulnerable to variations in temperature and the bidder when the PPP reaches financial close, as passage of time. In 2003, subsequent to a PDA a ‘success fee’, which is part of the procurement partially-funded feasibility study, a PPP was conditions for the project. The Evaluation/ entered into between the National Department Investment Committee appointed by the Head of of Health and Biovac, a developer of vaccines GTAC shall decide whether the funds allocated to and pharmaceuticals, for the distribution of the project are recoverable or not. vaccines procured by the State to all nine PDA provides financial assistance for hiring both provinces. The distribution agreement is project officers and transaction advisors. A project scheduled to expire on 31 December 2018. officer reports directly to the accounting officer of the sponsoring department and manages the implementation of the transaction advisor’s terms of reference to ensure compliance with Treasury Regulation 162. continued...
2 Treasury Regulations for Departments, Trading Entities, Constitutional Institutions and Public Entities, published in GN 740 GG 23643 of 25 May 2002 (the “Treasury Regulations”), issued in terms of the Public Finance Management Act, 1999 (the “PFMA”), as amended.
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• Province of the Western Cape. Chapman’s Peak the PDA were appointed in 2002, and a PPP for toll road. The Chapman’s Peak toll road PPP 26 years was thereafter executed between the agreement was entered into on 31 May 2003 with Free State Department of Health and a private the private party contracted to construct and sector medical services provider. The agreement maintain a toll road from Cape Town to the Cape was that the service provider would redevelop Point National Park area. In February 2009, the and upgrade certain aspects of Pelonomi province applied for PDA funding for consultants Hospital, use its wards and theatres, and to negotiate suitable amendments to the PPP generate revenue therefrom, while at the same agreement, which was causing difficulties among time, providing world-class medical services to the residents along the toll road route. On 25 July former Pelonomi patients at Universitas Hospital. 2009, the parties signed an amendment to the • Gauteng Province Cradle of Humankind World PPP agreement, negotiated by the consultants, Heritage Site. The Cradle of Humankind World which resolved the major resident-stakeholder Heritage Site in Gauteng Province is the source issues. This project illustrates how the creation of of many hominid fossils. It is currently the the PDA provides an alternative source of funding site of much research regarding our hominid for the resolution of any operational problems ancestors, with the discovery of Homo Naledi that may arise during the implementation of a being announced recently. Much of the site is PPP agreement. under the control of South Africa’s University • Free State Province Universitas and Pelonomi of the Witwatersrand (Wits), located in Hospitals. In 2000, the Province of the Free Johannesburg. In 2001, the province initiated State’s Department of Health undertook the PPP processes, partially financed by the PDA, assessment of a possible PPP project, whereby with the understanding and cooperation of the province would obtain the services of a Wits. A cooperation agreement was executed private sector medical services provider at its by the province and Wits in 2003, followed by Pelonomi Hospital, located in an underprivileged the signing of a PPP agreement with Maropeng area of Bloemfontein, by pairing it with another a l’Africa (MAL) for the design, construction, hospital also located in Bloemfontein, but in a maintenance and operation of the Interpretation wealthier area. Transaction advisors funded by Centre at the site.
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3. Guidance for project preparation
Guidance FOUR-STAGE TREASURY APPROVAL PROCESS
Owner National Treasury
Project Quality assurance development stage
Details Modules 1-4 (out of nine modules) of the PPP Manual systematically guide public and private parties through the phases of PPP project preparation for national and provincial governments. Each module of the PPP Manual is issued as a National Treasury PPP Practice Note, as per the 1999 Public Finance Management Act. The PPP Manual should be read together with the South African National Treasury’s Standardised Public-Private Partnership Provisions. The manual draws on South African project experience to date and on best international practice and sets rigorous risk-assessment standards by which the government will make affordable project choices that best leverage private investment for quality public services.
Module 1 (Regulations for PPPs) and Module 2 (Code of good practice for Black Economic Empowerment (BEE) in PPPs) deal with the enabling environment for project planning and delivery. Module 3 provides the steps in the PPP inception phase, including the hiring of transaction advisors and arranging of preparatory financing for the subsequent module.
Module 4 (PPP Feasibility Study) explains in detail how an institution should carry out a feasibility study to decide whether conventional public sector procurement or a PPP is the best choice for the proposed project.
Link for further details: https://www.gtac.gov.za/Publications/1160-PPP%20Manual.pdf
Guidance BUDGET FACILITY FOR INFRASTRUCTURE (BFI)
Owner National Treasury, Presidential Infrastructure Coordinating Commission (PICC) and Department of Planning
Project Quality assurance development stage
Details The Budget Facility for Infrastructure (BFI) is a reform to the budget process that supports the execution of national priority projects by establishing specialised structures, procedures and criteria for committing fiscal resources to public infrastructure spending. As directed by the Cabinet, the National Treasury is working jointly with the Presidential Infrastructure Coordinating Commission (PICC) secretariat, the Department of Planning, Monitoring and Evaluation (DPME) and the Economic Development Department (EDD) to establish the facility. The aim is to support quality public investments through robust project appraisal, effective project development and execution, and sustainable financing arrangements.
The objective of the facility is to address shortcomings in the planning and execution of infrastructure projects and help the government to build a pipeline of projects. The facility shall put a mechanism in place to improve the rigour of planning and budgeting for large infrastructure projects through standardised appraisal methodologies that ensure that full lifecycle costs of projects are planned, adequately budgeted and provided for in future budgets.
Link for further details: http://www.treasury.gov.za/publications/guidelines/Infrastructure%20 Guidelines%20Final%20May%2018.pdf
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INFRASTRUCTURE DELIVERY MANAGEMENT SYSTEM (IDMS) AND STANDARD FOR Guidance INFRASTRUCTURE PROCUREMENT AND DELIVERY MANAGEMENT (SIPDM)
Owner National Treasury
Project Project planning development stage
Details The government’s Infrastructure Delivery Management System comprises three core systems, namely a planning and budgeting system, a supply chain management system, and an asset management system, all of which have forward and backward linkages. These core systems are located within portfolio, program and project management processes, as well as operation and maintenance processes. Collectively these processes and systems, together with a performance management system, establish the institutional system for infrastructure delivery. The SIPDM (a component of the government’s IDMS) establishes control frameworks (through a stage-gate review process) for the planning, design and execution of infrastructure projects and infrastructure procurement.
Link for further details: http://www.treasury.gov.za/legislation/pfma/TreasuryInstruction/ Annexure%20A%20-%20Standard%20for%20Infrastructure%20Procurement%20and%20Delivery%20 Management.pdf
Guidance CAPITAL PLANNING GUIDELINES
Owner National Treasury, GTAC
Project Quality assurance development stage
Details Capital planning guidelines provide guidance on how infrastructure programs and project proposals should be planned, appraised and evaluated before significant funds are committed. The guidance encourages a lifecycle evaluation process, which is analytically robust. The National Treasury evaluation process recommendations are made to the Medium-Term Expenditure Committee (MTEC), which in turn advises the Ministers’ Committee on the Budget (MINCOMBUD) on projects that should be allocated funding.
The guidelines bring together the key principles involved in deciding whether a project is good, and worth the government’s investment. A ‘funnel’ through which projects can be sifted is set out and includes: (1) assessing projects for alignment with the country’s strategic considerations; (2) whether there is truly demand for the project; (3) whether it represents the most cost-effective option; (4) whether it is affordable; and (5) whether it is likely to be implementable.
Link for further details: https://www.gtac.gov.za/Publications/Appraisal_of_Infrastructure_ Guideline_Revised.pdf
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Guidance GTAC PROGRAMME AND PROJECT MANAGEMENT (PPM) TOOLKIT
Owner National Treasury, GTAC
Project Project management development stage
Details This toolkit provides a practical approach to the management of projects. The Programme and Project Management (PPM) Toolkit is designed to simplify the processes required to manage a project successfully from beginning to end. It defines project management in simple terms and provides the necessary documentation, tools and templates required to make the project a success throughout different phases. The National Treasury, through GTAC, took the initiative to roll-out the PPM Framework, Guides and Toolkits in all national departments and the nine provinces. The Project Management Body of Knowledge (PMBOK) approach was adopted as a basis for the development of the Programme and Project Management Framework. The material is customised to suit the South African public sector and is available to all in the public sector.
Link for further details: https://www.gtac.gov.za/knowledge-products/ppm-toolkit
Guidance USER GUIDE FOR BUDGET FACILITY FOR INFRASTRUCTURE (BFI) FINANCIAL MODEL
Owner National Treasury
Project Project appraisal and review development stage
Details The BFI Financial Model has been designed to appraise the affordability of any infrastructure project proposal submitted to the BFI. It provides the financial information required for any submission made by sponsors to the BFI, such as budget statements and Risk-Sensitivity Analysis. The user guide is designed to aid the user of the BFI Financial Model in setting up the model and to guide them through where and how to populate the model with data. In addition, this guide explains the use of output sheets and scenarios.
Link for further details: http://www.treasury.gov.za/publications/guidelines/2018%20Large%20 Strategic%20Infrastructure%20User%20Guide.pdf
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4. Project case example: Renewable Energy IPP Procurement (REIPPP) Programme
PROJECT BRIEF QUICK FACTS The REIPPP Programme was a landmark initiative by the Department of Energy (DoE) to rapidly scale-up grid connected renewable energy VALUE generation through private participation. The (IN US $ BILLION) REIPPP Programme was implemented against the historical backdrop of several failed initiatives 15 to contract Independent Power Producers (IPPs), owing to institutional shortcomings, capacity gaps and weak incentive structures. To overcome these limitations and to run the REIPPP Programme as a sophisticated, multi-project, multibillion-dollar international competitive STATUS bidding process for renewable energy, the DoE co-opted and took the assistance of the National Five bid windows* Treasury’s PPP Unit to manage the process. A small team of technical staff from the DoE and the PPP Unit established a project office, known as the DoE IPP unit, which effectively functioned outside the departmental structure and acted as PROJECT OWNERSHIP a facilitator for the REIPPP Programme.
Since inception, the REIPPP Programme has IPP Office, DoE received private sector investment of US $14 billion and created 36,528 job years3. Overall, 44% (i.e. 6,422 MW) of the total targeted renewable energy capacity of 14,725 MW, has been procured from 112 IPPs. More than 3,776 SOURCE OF PROJECT MW of electricity generation capacity from 62 PREPARATORY FINANCING IPP projects have also been connected to the national grid. The challenge for the government National Treasury PDF** now is to provide timely grid connectivity to the renewable energy IPPs.
SUPPORT AGENCIES PPP Unit NT, DoE, ESKOM
* Does not include the small projects IPPP program; ** National 3 The equivalent of a full time employment opportunity for one person Treasury Project Development Facility; Preparatory actions leading for one year. up to the first round auctions supported by DBSA
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PROJECT TIMELINE BID WINDOWS
Bid Window 1 • 4 November 2011 1998 White Paper on Energy Policy • 28 bidders 2003 White Paper on Renewables and • 1425 MW Integrated Energy Plan
2006 Electricity Regulation Act 2006 Bid Window 2 • 5 March 2012 • 19 bidders 2008 Inter-Ministerial Committee on Energy to unblocking hurdles in scaling up • 1040 MW energy sector; Strategic commitment of leadership to drive private sector Bid Window 3 • 19 August 2013 investment in renewable energy • 17 bidders
2009 Renewable Energy Feed-in Tariffs • 1457 MW (REFITs) policy
Bid Window 3.5 • 31 March 2014 2010 Integrated Resource Plan 2010-2030 • 2 bidders 2010 Establishment of IPP office in DoE • 200 MW
2010 Memorandum of Agreement (MOA) signed by DoE, NT and DBSA for Bid Window 4 • 18 August 2014 ZAR 80 million (US $11-12 million)* • 26 bidders assistance for consultants, a project office, and capacity building • 2205 MW
2011 Electricity regulations on new generation capacity
2011 Informal consultations with potential developers, lawyers and financial institutions on existing policy; Review of international tender processes in India, Brazil, Germany, France, Spain and elsewhere
2011 Launch of Renewable Energy Independent Power Producer Procurement (REIPPP) Programme
2012 National Development Plan 2030
* Average exchange rate of US $1 = ZAR 7 in 2010
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LEARNINGS FOR PROJECT PREPARATION 2. Programmatic approach to project preparation The success of the REIPPP Programme is an outcome through an empowered institution and sectoral focus of the government’s leadership and vision, meticulous Realising the need for a dedicated establishment to planning and detailing, and structural and operational design and implement the REIPPP Programme project interventions. The preparatory work involved preparation process, the Government of South Africa in creating and implementing the program has established a separate IPP office within the DoE in been extensive. 2010, to drive project management. The DoE and National Treasury (NT) entered into a Memorandum 1. Multi-year planning horizon for infrastructure of Agreement (MoA) with the Development Bank of backed by consistent and coordinated policy Southern Africa (DBSA) to facilitate the establishment and reform actions is central to the success of of this IPP office. The clarity in accountability, transformational projects the operational independence of the project unit The success of the REIPPP Programme entails a and its arms-length position with the government resilient political vision for the country and sectors departments helped to minimise procedural reflected in the multi-year planning framework, overheads, as well as bureaucratic restrictions, driving backed by a strong political will to achieve the project scale. The unit also focused on ensuring vision’s objectives. The consistent and coordinated sustained capacity building initiatives including policy actions to initiate regulatory and institutional training, case studies and communications programs. reforms and operationalise the recommendations of the Integrated Energy Plan, the Integrated Resource 3. Strong program champion supported by a Plan, and the White Paper on Energy and Renewables resourceful and dynamic team remains the foundation of the project’s success. The REIPPP Programme team was headed by a Each element of success is discussed below: dynamic officer from the National Treasury PPP Unit with deep expertise in project appraisal. Several other • A multi-year capital investment planning framework key stakeholders were also drafted into the team early that is consistent with development priorities. in the program planning phase. Giving autonomy to The sectoral planning documents (the Integrated this management team helped streamline program Energy Plan 2003 and the Integrated Resource Plan management. The management team included in 2010) were aligned with the nation’s commitment experts from the legal, technical, banking and financial to reducing its carbon footprint. The initial impetus sectors to create a resourceful and dynamic project to the program was provided in the White Paper on team. The team’s private sector experience and Energy Policy in 1998 (which promoted a greater familiarity with management in private sector circles role for the private sector and diversification facilitated the engagement process. The team also of energy sources), and the White Paper on created an entrepreneurial/start-up type of work Renewables in 2003 (which envisaged 10,000 MW culture, which was received favourably by the private of energy from renewables). sector players, as well as the bankers. The quality of • The government also created the necessary legal the management team and its dynamic leadership and regulatory framework for implementing the were key to driving private sector trust, especially 4 REIPPP Programme. The Electricity Regulation when the general outlook towards PPPs was muted . Act [No.4 of 2006] facilitated the establishment of an energy regulator (Section 3), the licensing of activities (Section 7), an estimation of new generation capacity across sources, the tendering procedure and the promotion of private sector participation (Section 34), and regulations on new generation capacity (Section 35). Specifically, Sections 34 and 35 of the Act set the framework for the REIPPP Programme.
4 A host of factors contributed to this sentiment and included (i) policy uncertainty, (ii) limited government support, (iii) cancellation of several PPP contracts, especially in social sector projects like prisons, and iv) negative public opinion over PPPs.
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4. Access to an independent high-quality team (transferred to a project development fund, which is for evaluation managed by the DoE). The multiple financing sources The team was supported by a high-quality private have ensured the sustainability of the program and advisory team of private domestic and international helped it to remain off the formal government budget advisers, including international reviewers (legal, after the first round. The availability of dedicated technical and governance), project management funding for the process ensured that high quality consultants, legal support, and a financial and private advisory assistance was available for the technical evaluation team. The primary reason for DoE IPP office in planning the process. The cost of access to such a high-quality team was the availability preparing a bid and taking it to financial close for the of a dedicated project financing facility. The project first round of auctions is estimated at around ZAR 25 team received technical assistance from the expert to 30 million (US $3-4 million) and was supported by teams from Spain and Denmark under the bilateral the National Treasury, the World Bank and DBSA. assistance program. The DoE IPP office also had a large number of transaction advisers with strong 6. Continuous engagement with the market national and international expertise. The opportunity participants helped shape the program design to imbibe learnings from the European counterparts, The team made continuous engagement with the as well as the availability of quality advisers, have private sector players and bankers a priority, to been highlighted as critical success factors for project ensure that the program design was aligned with the preparation in South Africa. The table below provides prevailing market environment. This also helped to a snapshot of consultants and transaction advisers, allay general concerns related to the PPP model during among many others, providing technical, legal and this period. Design factors, including the signing of the financial assistance to the DoE IPP office. PPA early on, and implementation arrangements, were an outcome of this effective engagement process. REIPPP PROGRAMME EVALUATION One of the unique elements of the program was that CONSULTANTS the bidders were expected to come with lenders already locked in, which helped in incorporating the International Reviewers: Legal: Linklaters (UK), lenders’ concerns into the program design. Technical: Tony Wheeler Consulting (UK), and Governance: Ernst & Young 7. Strengthening baseline information and high governance standards to aid private sector interest Project Management: SPP Project Solutions To aid with the significant risk of delivery transferred Legal Evaluation: Bowman Gilfillan, ENS Africa, by the program to the private sector, the South Ledwaba Mazwai and Webber Wentzel African Government created information disclosure systems to enable private sector decision-making. The Technical Evaluation: Mott MacDonald government had already taken initiatives to provide Financial Evaluation: Ernst & Young (EY) and PwC base information regarding renewable energy sources like solar and wind energy, which would serve as Source: South Africa’s Renewable Energy IPP Procurement Programme: Success Factors and Lessons May 2014 (PPIAF) guidance for the prospective private sector partners. Some of the key initiatives include:
5. Availability of adequate and sustained project • The Solar Data and Resource Mapping study preparation financing conducted by the Southern African Universities The REIPPP Programme was backed by dedicated Radiometric Network (SAURAN) financing for project preparation and capacity building. • Wind Atlas for South Africa (WASA I) under the DoE, Some of the sources include: (i) the National Treasury the Global Environmental Facility (GEF), the United (made available through DBSA) approximately US Nations Development Programme (UNDP) and the $7.5 million; (ii) technical assistance financing from bilateral donor agencies (Denmark, Spain, and the Danish Government UK), and multilateral agencies (US $6 million from the Further, transparency and high standards of World Bank through the Global Environment Facility); professionalism in program management, adherence and (iii) self-financing through bidder registration fees to timelines, and high standards of quality assurance and project development fees of 1% of the project cost led to the program’s credibility and resulted in high participation by the private sector.
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1. Noteworthy practices for project preparation
EXISTING ENABLING PROJECT IDENTIFICATION ENVIRONMENT AND CONCEPT DEFINITION
IPA’s role as a centre of excellence for project Systematic processes to aid conceptualisation preparation of major projects
The Infrastructure and Projects Authority (IPA) defines IPA supports early stage project planning by providing the overarching framework for project preparation in tools that help identify major projects, to verify the the United Kingdom (UK). Guidance designed by IPA holistic fit and synergy with overarching government serves as the standards for contracting authorities policies. For example, the early development pool to develop projects. IPA also undertakes quality for major projects is monitored and reviewed by assurance reviews for major projects, and supports IPA, providing assurance for project development capacity development and delivery support. at the initiation stage. Further, the Project Initiation Routemap provides guidance on a structured PUBLIC SECTOR CAPACITY approach to identifying and defining projects. FOR PROJECT PREPARATION PROJECT FEASIBILITY Institutionalising capacity enhancement through AND STRUCTURING multiple interventions Multi-dimensional approach to developing business Capacity development initiatives are central to cases, mapped to a comprehensive review process the UK’s project preparation landscape and are undertaken at the apex level by IPA. These are further Her Majesty’s (HM) Treasury’s Five Case Model supported by individual departments who conduct encourages contracting authorities to evaluate project their own training and apprenticeship programs, feasibility through five interdependent lenses. As the aligned to the specific needs of the department. feasibility study progresses across different stages, the Office of Government Commerce’s (OGC) Gateway PROJECT IDENTIFICATION Review process provides a ‘peer review’ mechanism to AND CONCEPT DEFINITION ensure that they can progress to the next stage.
Multi-year plans and pipelines used to support PROJECT APPROVALS an overarching long-term vision, and progress AND QUALITY ASSURANCE monitored by IPA to help strengthen accountability Defined framework for quality assurance The UK’s National Infrastructure Assessment (NIA) with requisite support tools provides a 30-year strategic vision for infrastructure development in the country. The vision is realised The UK’s quality assurance framework is through the annual National Infrastructure Plan comprehensive, providing varying levels of scrutiny (NIP), a four-year pipeline of prioritised projects. depending on project complexity, such as the IPA Implementation of these pipelines is closely monitored gateway review series for major projects, project and reported by IPA. validation reviews for early stage assurance for major projects, and project assessment reviews, which are tailored to the specific needs of a particularly complex project. These reviews can be conducted through HM Treasury panel meetings, and/or an expert team under the Major Projects Review Group could be commissioned.
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2. Snapshot of project preparation activities
The UK has often been regarded as a pioneer of Established in 2015 by the merger of Infrastructure project delivery globally, providing a useful learning UK (IUK) and the Major Projects Authority (MPA), opportunity for developing countries embarking on IPA has a long history of managing and delivering the implementation of large projects. major infrastructure projects through its founding institutions. Through its Private Finance Initiative (PFI), launched in 1992, the UK has delivered £56 billion of private sector capital investment in over 700 projects over A merged IPA combines expertise in delivery, two decades. Today, the government is implementing assurance and financing, helping to manage one of its most ambitious policy agendas ever – major infrastructure projects within one the current Government Major Projects Portfolio government entity – thus defined as ‘the (GMPP) includes 143 projects worth over £455 billion UK Government’s centre of expertise for (= US $586 billion), across 17 departments. These infrastructure and major projects’. projects are increasingly diverse in their nature, objectives and complexity: ranging from capital intensive infrastructure projects like High Speed The IPA does not implement projects but instead Two (HS2) – a new high speed rail network linking the focuses on the overall project delivery system, south and north of the UK – to major transformations which includes the projects, people and processes like the Her Majesty (HM) Courts Reform, which that together create the right environment for will modernise the way people interface with the successful delivery. It is part of a wider institutional courts service. framework for infrastructure planning and delivery. To help shape a vision for the future for the UK’s INSTITUTIONAL FRAMEWORK economic infrastructure, the Treasury has created Project preparation activities in the UK are the National Infrastructure Commission (NIC). The decentralised, with each line department and local NIC has prepared its first National Infrastructure government being responsible for their own project Assessment (NIA) in 2018, which analyses the UK’s preparation as procuring authorities. Procuring long-term economic infrastructure needs, outlines authorities plan, structure and procure projects, and a strategic vision over the next 30 years and sets pay for the infrastructure services, either by collecting out recommendations for how the identified needs user charges or through their government budgets. should be met. The NIA will be tabled in Parliament Activities for project development are funded through and the NIC will monitor progress on the government’s the federal or local government budgets. Quite often, implementation. The NIC is a unique entity that has for major projects, special agencies are created that independent experts and industry leaders as its are provided with separate budgets. commissioners. Although funded by the Treasury, For example, Crossrail Limited has been incorporated it functions at arm’s length and provides independent by Transport for London (TfL) to plan and implement advice and progress monitoring. the new railway lines in London. Once completed, the railway lines will be handed over to TfL for PROJECT PREPARATION LANDSCAPE operations. Similarly, HS2, the railway linking The HMT and IPA provide a variety of support tools London, Birmingham, the East Midlands, Leeds to guide project preparation in the UK. While these and Manchester, is being developed by High Speed are binding only on major projects that require HMT Two (HS2) Limited, a company established by the approval or projects that also solicit an independent UK Government. review from IPA, most line agencies have aligned their project preparation activities in line with the To guide the above-mentioned implementing best practice guidelines prescribed by HMT and IPA. agencies, the government has created two unique institutions; the Infrastructure and Projects Authority Project identification and concept definition. (IPA) and the National Infrastructure Commission Project identification at the line ministry and local (NIC). The IPA, reporting to Her Majesty’s Treasury government level is guided by the long-term vision (HMT) and the Cabinet Office, has been formed to for development prepared by the NIC, under the NIA. oversee general policy on project delivery and quality Typically, ministries have established dedicated assurance of specific business case proposals. teams that lead project conceptualisation activities.
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Procuring authorities identify projects that meet is followed by a more comprehensive full business national priorities, which are integrated through two case and its updates prior to implementation. long-term plans prepared by the IPA – the National Individual central government departments and local Infrastructure and Construction Pipeline (NICP) and governments undertaking non-major projects are the National Infrastructure Delivery Plan (NIDP). The not bound by project preparation guidelines provided NICP unites planned public and private investments by HMT. However, recognising the benefit of a across all economic sectors, providing clarity on the standardised approach to project preparation, most of infrastructure spending expected to be achieved these departments have designed their internal project over a five-year period. The NICP also tracks the processes on the basis of those for major projects. progress of nationally significant projects identified Project approvals and quality assurance. The Her in the earlier plans, and is updated on an annual Majesty’s Treasury (HMT) recommends specific basis. The NIDP builds on the NICP, detailing on how guidelines for independent review of all new major the UK Government aims to support the delivery of projects requiring HMT and IPA approvals: infrastructure projects identified under the NICP, with a dedicated pipeline of housing and social infrastructure OGC Gateway ReviewTM projects. To support project identification, the UK’s project preparation framework provides a multitude The UK has instituted a comprehensive and of tools: mandatory peer review process at key decision points in the project lifecycle to enhance the quality of project The Early Development Pool (EDP) for major preparation and to set government expectations in government projects and programs (in the GMPP): project delivery. The Office of Government Commerce Institutionalised by IPA, the EDP includes projects that (OGC) Gateway ReviewTM process was introduced in could potentially join the GMPP in the future. Inclusion 2000 after several project failures in the UK and the of nationally significant projects in the EDP enables reevaluation of the government’s effectiveness in IPA to provide hand-holding support at the project projects and program delivery. initiation stage itself. Major Projects Review Group (MPRG) The Project Initiation Routemap (PIR) Sponsored by HMT, the IPA coordinates the MPRG, The PIR is a best practice guideline prescribed by IPA, which is an independent group of experts from the which provides a structured approach to identifying government and private sector. The MPRG challenges and conceptualising projects through a collaborative projects on deliverability, affordability and value for approach with IPA. From 2018, all major projects are money at key points in the HMT approvals process assessed for their need and suitability for applying and as required at other key decision points during the routemap to guide conceptualisation. a project’s lifecycle.
Stage 0 of the Five Case Model IPA Quality Reviews The Five Case Model is a thinking framework In addition, the IPA has enhanced the quality review recommended by the HMT, which defines a structured process with a range of different independent approach to developing business cases. Stage 0 of assurance reviews. Depending on the project cost and the Five Case Model outlines a method to help identify the department’s track record of executing projects projects that verify the strategic necessity of the of similar complexity, these reviews range from formal project or program. gateways to more bespoke ‘critical friend’ reviews.
Project feasibility and structuring. All line agencies must prepare business cases for their spending proposals. These cases are prepared according to a model which views proposals from five interdependent dimensions, prescribed by the Green Book of HMT – known as the Five Case Model. These five dimensions are: strategic, economic, commercial, financial and management. The business case evolves as the project preparation for the project progresses. For projects, a strategic outline case is prepared at the conceptualisation stage, thereafter an outline business case is prepared at the pre-feasibility stage, which
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HOW IS IPA MAKING A DIFFERENCE IN PUBLIC • Project leadership development: The IPA plays SECTOR PROJECT DELIVERY? an important role in equipping project leaders The IPA, including its predecessor entities such with the right skills, training and capabilities to as the MPA and IUK, have contributed remarkably deliver infrastructure projects. In 2017, the IPA to enhancing the project preparation ecosystem launched the Project Delivery Capability Framework in the UK. Major contributions include: (PDCF), which outlines a common language for the profession and defined career paths to help • Setting project standards and good practice manage their careers. This framework is now guidance: This includes documentation related to being used by all major departments to help drive all major aspects of project preparation and project professionalism. In addition, the Government evaluation, such as project initiation routemaps, Online Skills Tool (GOST) supports the rollout independent assurance methodology and other of PDCF by allowing individuals to assess their technical guidance documents and templates. skills and competencies against any project role, • Infrastructure delivery support: IPA has a team of and to identify appropriate development options. commercial specialists that provide direction to It is currently being used by over 4,000 project the government and its agencies on all aspects professionals across government, and this number of infrastructure delivery. The specialists can will grow following full rollout. be deployed alongside the senior leaders and • Independent quality assurance: IPA uses project teams to strengthen client capability. independent experts for peer review and quality IPA also provides HMT and the Cabinet Office with assurance of projects at critical stages, against commercial advice on business case approvals a clear set of project standards. During 2017-18, for specific projects. the IPA conducted 230 independent assurance • Training and leadership development: Based on reviews on the Government Major Projects Portfolio the recognition that great project leaders deliver (GMPP) projects. The IPA has created an assurance great projects, IPA has partnered with Oxford Saïd review pool of over 1,600 independent assurance Business School to create the Major Projects reviewers from across government and industry. Leadership Academy (MPLA). MPLA aims to • Performance review: The IPA undertakes the improve the ability of senior civil servants to lead Infrastructure Performance Review to identify major projects and is regarded as the gold standard ways the government, working with industry, for project leadership training. It improves senior can improve the quality, cost and performance civil servants’ ability to lead major projects with of UK infrastructure, building on the Infrastructure the aim of creating a cadre of world-class project Cost Review 2010–2014. At the upstream end, leaders. Over 400 professionals have enrolled in the IPA supports the preparation of the National the MPLA, and 250 have graduated to date. The Infrastructure Development Plan, which brings MPLA received a Silver Award from the European together all of the government’s infrastructure Foundation for Management Development delivery priorities over the next five years; and the (EFMD) for their Excellence in Practice Awards, National Infrastructure Construction Pipeline, which in the category of professional development. In is a forward-looking pipeline of planned projects addition, there are other project leadership training, and programs in economic and social infrastructure apprenticeship and future leaders’ programs that and housing. have been launched by IPA.
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3. Guidance for project preparation
Guidance THE GREEN BOOK, FIVE CASE MODEL
Owner Her Majesty’s Treasury (HMT)
Project development Feasibility study stage
Details The Five Case Model guidance provides an approach to preparing business cases for infrastructure projects. All major projects must design rationales for undertaking a project through dimensions defined in the Five Case Business Model – strategic, economic, commercial, financial and management. The business case, along with the impact assessment reports, are required to be put through a long-list option analysis for delivery, followed by a short-list appraisal on the principles of cost-benefit analysis.
Link for further details: https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/469317/green_book_guidance_public_sector_business_ cases_2015_update.pdf
Guidance GATEWAY REVIEW PROCESS
Owner Office of Government Commerce (OGC)
Project development Quality assurance stage
Details The Gateway Review process aims to deliver a ‘peer review’ of projects at critical stages in their lifecycle, to provide assurance that they can progress successfully to the next stage. The Gateway Review Process covers six ‘Gates’, numbered from 0 to 5. These gateways cover aspects from strategic assessment of the program to examining the full business case of the project, as well as monitoring the operations of a project. Principles of the Green Book are incorporated in Gates 1 and 2. For all major projects, HMT approvals are required at Gates 1, 2 and 3.
Link for further details: https://www.gov.uk/government/publications/ogc-gateway- review-0-strategic-assessment-guidance-and-templates
Guidance INTEGRATED ASSURANCE AND APPROVALS PLAN
Owner Infrastructure and Projects Authority (IPA)
Project development Quality assurance stage
Details These guidelines define the assurance options to be undertaken for a major project, such as: Project Validation Review (PVR) for a major policy initiative; OGC Gate 0 for major programs whose individual project components may not be considered ‘major’; OGC Gates 1 – 5 for major projects being delivered through a standard methodology; and Project Assessment Review (PAR), which is tailored to a project’s needs. Depending on the project cost and the department’s track record of executing projects of similar complexity, major projects must seek assurance from the HMT Spending Team and IPA through one of these routes, at various stages of the project.
Link for further details: https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/638198/guide_to_implementing_integrated_assurance.odt
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Guidance PROJECT INITIATION ROUTEMAP
Owner Infrastructure and Projects Authority (IPA)
Project development Project initiation stage
Details The Project Initiation Routemap is a structured approach to setting up projects for success and is the IPA’s primary tool in supporting the initiation of projects across government.
Link for further details: https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/529311/
Guidance PROJECT DELIVERY CAPABILITY FRAMEWORK
Owner Infrastructure and Projects Authority (IPA)
Project development Institutional capacity development stage
Details The framework provides a description of the job roles, capabilities and learning initiatives for professionals involved in project delivery. Using this framework, project delivery professionals can map their career path, identify the skills required to deliver their job, and chart out and monitor a course for development through learning initiatives.
Link for further details: https://www.gov.uk/government/publications/project-delivery- capability-framework-for-civil-servants
Guidance GOVERNMENT ONLINE SKILLS TOOL
Owner Infrastructure and Projects Authority (IPA)
Project development Institutional capacity development stage
Details The GOST has been developed alongside the Project Delivery Capability Framework (PDCF). It helps project delivery professionals to assess their current skill set, identify what skills they need for future career aspirations, and build a development plan to support different types of learning, including on-the-job learning and continuous professional development.
Link for further details: https://www.gov.uk/government/publications/project-delivery- capability-framework-for-civil-servants
Guidance EARLY ASSESSMENT AND SIFTING TOOL
Owner Department of Transport
Project development Appraisal stage
Details The Early Assessment and Sifting Tool is a decision support tool developed to evaluate and appraise options for infrastructure development. It provides decision-makers with relevant, high-level information to help them form an early view of how options perform and compare.
Link for further details: https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/4474/east.xls
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4. Project case example: Thames Tideway Tunnel
PROJECT BRIEF QUICK FACTS The Thames Tideway Tunnel is an interceptor sewer being constructed in central London to control the 39 million tonnes of untreated sewerage that flows in to the Thames River VALUE on an annual basis. (IN US $ BILLION) The project was conceptualised in 2000 as a response to the European Commission’s Urban 5.4* Waste Water Treatment Directive, which required the UK to address its non-compliance with the directive’s requirements. The sewer tunnel runs 25 kilometres long, from Acton in West London to Abbey Mills in East London, intercepting 34 combined sewer outflows (CSOs). STATUS The project was successfully bid out in 2016, and is privately financed by the Bazalgette Under construction consortium, supported by the UK Government’s fiscal support package, to mitigate the project risks and make the project viable for private financing.
The planning of this project is a reflection of the UK’s inter-agency coordination. The Department PROJECT OWNERSHIP of Environment, Food & Rural Affairs (DEFRA), responsible for the overall policy on water and Thames Water sewerage in the UK, worked closely with Thames Water, a private company responsible for sewerage infrastructure in London, to develop a solution for the overflows. While Thames Water undertook the planning, design and tendering of the project, it was also supported by SOURCE OF PROJECT IUK (later IPA)1 owing to its major project status. PREPARATORY FINANCING The Water Services Regulatory Authority Thames Water internal (Ofwat) was the independent economic regulator accruals to determine the charges to be borne by the customers of Thames Water for funding the tunnel construction.
Further details on the project can be found on: https://www.tideway.london/ and https://gihub-webtools.s3.amazonaws.com/ SUPPORT AGENCIES umbraco/media/1602/gih_showcaseprojects_ thames-tideway.pdf IPA, DEFRA
1 IUK merged with the MPA in 2015 to become the IPA. For the purpose of this case study, the terms IUK and IPA have been used interchangeably, noting that all capabilities of the IUK to support and appraise projects were moved under the IPA umbrella. *Estimated Exchange Rate: £1 = US $1.29 (as of November 2018)
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PROJECT TIMELINE LEARNINGS FOR PROJECT PREPARATION 1. Support from IUK / IPA for project development Mar-00 Thames Tideway Strategic Study The Thames Tideway Tunnel is not a government commissioned project and would therefore not normally be subject Mar-05 Report on Thames Tideway Strategic to IPA oversight and monitoring. However, given the Study completed and presented scale and nature of the project, it was decided that IPA would provide oversight and assurance for the set-up Dec-06 Thames Water publishes detailed of the project. analysis on shortlisted options IPA provided regular support to the project from Mar-07 DEFRA announced selection of its conception in April 2012, when the project was preferred option admitted to the GMPP. The areas of assistance provided by IPA included: Aug-10 Thames Water Needs Report ratifies selected option • Providing direct support in designing the delivery structure and contingent financial support package Sep-10 First round of public consultations by the Government of the UK to make the project launched; IUK commences support to attractive for private financing. DEFRA • Independent quality assurance reviews with Nov-11 Second round of public consultations specialist periodic inputs, in line with the OGC launched Gateway Review Process.
Oct-12 Final round of public consultation ends • Assistance on policy-related matters, including acquiring ministerial approval and passing of the Nov-12 Infrastructure market participant National Policy Statement of Waste Water, a critical consultations launched legislation for parliamentary approval of the project.
Dec-12 Project enters the GMPP • Continued support to DEFRA through long-term Feb-13 Thames Water submits planning secondment for providing expert input. application 2. Independent options analysis to choose the best Sep-13 Preparation of strategic business case; option for delivery Assurance review 1 by IUK Aligned to IPA’s Five Case Model, a series of studies were commissioned in three phases to identify Apr-14 Tender of shortlisted contractors potential solutions to London’s sewer outflow by Thames Water for construction challenge. These studies, conducted by a team of contracts inter-departmental expert groups, ensured that a Sep-14 Preparation of outline business case; comprehensive appraisal of a broad range of options Assurance review 2 by IUK (including the most cost-effective combination of measures), using cost–benefit analysis, was carried Sep-14 Ministers grant Development Consent out in accordance with HMT’s Green Book guidance. for the project • The Thames Tideway Strategic Study (2000-2005). Aug-15 Ofwat granted Bazalgette Tunnel In this first phase, Thames Water commissioned Limited a regulatory licence; a task force chaired by an independent expert to Government Support Package agreed; conduct the Thames Tideway Strategic Study. To project achieved financial close. identify options, the task force drew on the views of numerous stakeholders, including the Environment Dec-15 Preparation of full business case; Agency, DEFRA, the Greater London Authority and Assurance review 3 by IUK/IPA Ofwat. The study identified eight possible options Jan-16 Construction work commences and further conducted feasibility and cost-benefit analysis for each of these. 2023 Planned commencement of operations
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• The Thames Tideway Advisory Group (2005-2006). 5. Strong leadership team comprising trained Building on the options identified under the project managers Strategic Study, DEFRA commissioned a working Thames Tideway Tunnel’s project team was supported group to evaluate the findings of the report. The by a long-term secondment from IPA to provide working group further shortlisted three options ongoing expert input to overcome the challenges in for detailed evaluation, on the basis of which the project development. Further, several members of the existing full tunnel option was identified as the project team, including the Senior Responsible Officer, most suitable solution. were graduates of the government’s Major Projects Leadership Academy (MPLA). The experience of the • The Needs Report (2009-10). Thames Water’s project team in dealing with major projects within IPA Needs Report further ratified that the Tideway and supported training helped shape their approach Tunnel continued to remain the most cost-effective to management of the project, particularly in the areas solution for achieving the statutory environmental of public engagement and stakeholder management. obligations.
6. Applied learning from past experiences 3. Clarity in outcome translating to defined objectives While cost estimates for the tunnel increased progressively from 2007, owing to changes in scope The Thames Tideway Tunnel project was designed and design, experience from the Lee Tunnel, a similar to meet a specific set of clearly defined goals – to project in the UK, was used to bring about better reduce the sewage pollution being discharged into understanding and rationalisation of cost estimates. the River Thames, in line with European Commission Further, the project benefitted significantly from IPA’s directives for environmental conservation. To support experience in dealing with similar large-scale projects this, DEFRA’s departmental strategic objectives were under Crossrail and High Speed Rail 2, ensuring translated in to specific criteria on the basis of which more detailed upfront planning than is usual for a identified options for project delivery were evaluated. PPP project at the pre-commissioning stage itself. These objectives defined the measures for minimum For instance, unlike the traditional design and build satisfactory performance for the sewer tunnel, approach for PPP projects, detailed design plans for derived from the negative effects likely to eventuate the project were developed prior to commencement in the absence of a solution. of the tender procedure, under the oversight of Ofwat. To select the optimal solution for the problem, the lowest-cost solution, which met all three criteria, was selected.
The criteria has now evolved into a defined framework for monitoring the project progress and outcome by independent technical assessors empaneled by DEFRA.
4. Extensive public-private engagement at the planning stage Thames Water carried out two extensive public consultations to refine the route for the Thames Tideway Tunnel. The first round of public consultation took place between September 2010 and January 2011, and the second between November 2011 and February 2012. It also conducted a third targeted consultation on four specific sites between June 2012 and July 2012. Thames Water subsequently revised its plans and submitted its planning application for a Development Consent Order (DCO) to the Planning Inspectorate on 28 February 2013.
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Appendix B: Detailed methodology for reference tool
The objective of the analysis was to understand the • Regional and income distribution – The initial broader economic and infrastructure context in the shortlist of countries was passed through shortlisted countries and key elements of the existing a regional and income filter to ensure wider project preparation ecosystem that drive public and adaptability of the reference tool. Although it is private sector infrastructure investment growth. evident that the developed countries generally have better overall scores in the quantitative framework 1. Task 1: Selection of countries for the reference tool and in the general quality of project preparation, The identification of country case studies for the it was also important that the reference tool preparation of the reference tool was driven by captured best practices from across regional two-stage multi-factor criteria: and income brackets. A total of 28 top-ranked countries were shortlisted at this step. The number Stage I – Quantitative framework, and regional and of countries shortlisted in each region is driven by income assessment the population of the region and its contribution The country evaluation was based on two-step criteria: to global GDP. Accordingly, the following countries were shortlisted after Stage I: • Step 1 – Countries ranked in top 100 on quality of infrastructure in the infrastructure pillar of the WEF ––Middle East and Africa – A total of five countries Global Competitiveness Index, 2017 – The Global were shortlisted for qualitative assessment, Competitiveness Report published by the World which included UAE (High income), Mauritius and Economic Forum (WEF) ranks 135 countries across South Africa (Upper-middle income), Kenya (Lower- 12 pillars – one of them being infrastructure. Within middle income), and Rwanda (Low income). this pillar, each country is scored from 1 – 7 on ––Americas – The shortlisting of countries the basis of: (i) quality of overall infrastructure; represented the high and upper-middle income (ii) quality of transport infrastructure (roads, rail, segments. A total of six countries were ports, aviation); (iii) quality of electricity supply; shortlisted for qualitative assessment, which and (iv) mobile cellular and fixed telephone line included USA, Canada and Chile (High income), and connections. Presence of quality infrastructure in Brazil, Mexico and Ecuador (Upper-middle income). a country could be considered as a proxy of strong project preparation processes, enabling large-scale ––Europe and Central Asia – A total of five countries infrastructure programs to be delivered in the were shortlisted for qualitative assessment, country. For the reference tool, the top 100 ranked which included the Netherlands, Switzerland, countries were shortlisted. France, Germany and the UK (High income). Since most of the countries in the region are in the • Step 2 – Countries with a score of 45 and above in high income segment, income segmentation Project Preparation under Procuring Infrastructure was not considered for the shortlisting process. PPPs 2018 – A study conducted by the World Bank ranks economies on the ability of governments to ––South and East Asia, and the Pacific – A total of prepare, procure and manage PPP projects in the twelve countries were shortlisted for qualitative country. One of the pillars on which these countries assessment, which included Australia and have been scored includes the preparation of New Zealand (Pacific – High income), Japan PPPs, which has been evaluated on 10 indicators and the Republic of Korea1 (High income), China covering: (i) approval for PPP projects by a central and Malaysia (Upper-middle income), and India, budgetary authority; (ii) integration of PPPs with Indonesia, the Philippines, Sri Lanka and Vietnam public finance management; (iii) assessment of (Lower-middle income). The shortlisting of feasibility studies required to be conducted; and (iv) countries selected represents both high and availability of standardised documentation and PPP middle income segments. contracts. Based on the above, 58 countries with a project preparation score of more than 45% were initially shortlisted for analysis. 1 Higher-ranked Hong Kong and Singapore were not considered due to their limited geographical area and population.
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Stage II – Qualitative analysis but limited application in projects/programs were categorised as ‘Moderate’. Countries with In addition, for the final selection, a qualitative filter relatively lower project preparation standards, and was applied based on the collective experience of limited success in application were categorised our expert team in working in these countries. The as ‘Low’. qualitative analysis gauged the effectiveness of shortlisted countries in shaping unique programs Based on a quantitative and qualitative approach related to infrastructure and project preparation used for country selection for the reference tool, 15 to meet their specific needs and in adopting good countries were shortlisted across all continents to practices in project preparation. maintain a regional balance. The list of countries selected forms an initial list of countries covered for The qualitative framework for project selection is the reference tool. There may be potential to update detailed below: the reference tool from time to time, incorporating • Income-based classification – Under each learnings from the original broader list of countries. region, countries were grouped according to their income category, to integrate country experiences HI: High income LMI: Lower-middle income in project preparation across income categories UMI: Upper-middle income LI: Low income and better understand different solutions to meet varied socioeconomic needs. The income Americas segmentation was based on the World Bank’s HI Canada Country and Lending Groups classification for the fiscal year 2019. HI Chile
• Private sector investment – The countries were UMI Mexico categorised based on the level of private sector UMI Brazil investment that was attracted over the last five years against the total infrastructure investments made; the hypothesis being that the ability to Africa tap private investments is generally indicative UMI South Africa of the trust in the quality of project preparation processes in the country. The information LMI Kenya on investments related to private sector and LI Rwanda infrastructure was sourced from the country profiles under GI Hub’s InfraCompass and was contextualised based on the knowledge of the Asia expert team. The classification was based on the proportion of private sector investment to UMI China total investment and divided into the following LMI India categories: Less than 10% (Low), Between 10% LMI Indonesia and 15% (Moderate), 15% and above (Strong). LMI Philippines • Elements of good practices in project preparation – Finally, countries were studied HI South Korea on the distinctive elements or application of good principles in project preparation. This Europe included assimilating key elements of select HI United Kingdom transformational infrastructure programs that have been relatively successful in preparing HI Netherlands bankable projects and attracting private finance. Countries with clearly established legal, institutional and procedural frameworks for Oceania project preparation, systematic application of project preparation standards across projects/ HI Australia programs and an established track record of successful project preparation were categorised as ‘Strong’. Countries with an established legal, institutional and procedural framework,
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2. Task 2: Mapping the project preparation • Shortlisting of project case studies – The ecosystem in each country shortlisting of project case studies was driven by This stage involved mapping the project preparation the suggestions of the country level officials, inputs landscape in the shortlisted countries based from the GI Hub team and inputs from our expert on extensive secondary research and targeted team. The project case studies were selected to consultations with country level key officials. The reflect learnings across the project preparation steps in mapping the project preparation ecosystem spectrum while ensuring sectoral representation. for each country is provided hereunder: The information provided by the country officials was complemented by secondary research. • Identification of key officials from each country – Based on an initial assessment of the project • Mapping of noteworthy practices and tools for preparation landscape in the identified country, project preparation – After mapping the project a preliminary list of institutions and key officials preparation landscape, we worked in close involved in project preparation were shortlisted. coordination with the GI Hub team to identify This included the apex institution or specialised the noteworthy practices and the unique tools agency for capacity building, and sectoral that assist in improving the quality of project departments or agencies and support agencies preparation in each country. The noteworthy in project preparation. The list of key officials was practices were identified across each element of further strengthened with inputs from the GI Hub project preparation including enabling environment, team and inputs from the experts working on the public sector capacity, project identification assignment. The final list of stakeholders reached and concept definition, project feasibility and out to during the course of preparation of the structuring, project approvals and processes, and reference tool is attached in Appendix D. project marketing and stakeholder engagement.
• A formal request for support was sent to the The findings from primary and secondary research key representatives of the agencies identified. were complemented with insights from our As inputs for the call, the following documents Project Team, which brings in experience in project were also prepared and shared with the country preparation from across several countries in South officials: i) a consultation docket, including a brief Asia, South-East Asia, Africa, Latin America and questionnaire on the project preparation scenario Europe. in the country, and an initial list of identified best practices in the country; and ii) an information 3. Task 3: Collating the ideas from tasks above as inputs to the reference tool docket, which includes an initial list of identified best practices from the country and an overview As a final step towards the study, we focused on of the project preparation landscape, based on preparing the overall project preparation reference secondary research for validation and inputs. tool. The reference tool was structured to address The information docket was prepared to create a all aspects of project preparation that were relevant shared understanding of the project preparation to governments and implementing agencies across context in the country, covering the size of project the globe. preparation, the institutional responsibilities for The reference tool reviewed key success factors project preparation and the key stakeholders. underlying project preparation through a country-lens • Multiple rounds of interaction with country perspective. It was designed to be complementary officials and preparation of country case study to the G20 IWG Principles for the Infrastructure Project – We initiated consultations (largely through Preparation Phase and the MDB Guidance Note on PPF telephonic consultations) with the officials across Structure and Operations. two stages: Stage 1 – Consultations to identify the project preparation landscape in the country and examples of key successful projects; Stage 2 – Country case study review and validation. The secondary research and the interactions were critical inputs to the preparation of the country case studies.
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Appendix C: Relevant literature
Guidance documents Australia
1. Assessment of Project Preparation Facilities for 14. Infrastructure Australia Statement of Intent, Africa: Diagnostic and Recommendations, The 2017-2019 Infrastructure Consortium for Africa, 2012 15. Australian Infrastructure Audit, 2015, 2. Strategic Infrastructure - Steps to Prepare and Infrastructure Australia Accelerate Public-Private Partnerships, BCG- 16. Australian Infrastructure Plan, 2016, World Economic Forum, 2013 Infrastructure Australia 3. Concept Paper on Effective Project Preparation 17. Prioritising Reform, 2018, Infrastructure Australia for Africa’s Infrastructure Development, the National Treasury Republic of South Africa, 2014 18. National Infrastructure Data Collection and Dissemination Plan, 2018, Department of 4. Assessment of the Effectiveness of Project Infrastructure, Regional Development and Cities Preparation Facilities in Asia-Final Report, G20 Development Working Group/Adam Smith 19. Yearbook 2017, Department of Infrastructure and International, 2014 Regional Development
5. Assembly Lines for Project Development - The 20. Assessment Framework, 2018, Infrastructure Role of Project Preparation Facilities (PPFs), Australia Heinrich Boll Stiftung-North America, January 21. National PPP Guidelines – Overview, 2008, 2015 Department of Infrastructure and Regional 6. Partnering to Build a Better World - MDBs Development Common Approaches to Supporting 22. National Infrastructure Construction Schedule, Infrastructure Development, African Development Factsheet, 2014 Bank/ADB/EBRD/EIB/IFAD/Islamic Development Bank/IDB/World Bank, September 2015 23. Corporate Plan, 2018-19, Department of Infrastructure, Regional Development and Cities 7. Africa Strategic Infrastructure Initiative - A Principled Approach to Infrastructure Project 24. Australian Transport Assessment and Planning Preparation Facilities, The Boston Consulting Guidelines, 2018, Transport and Infrastructure Group, June 2015 Council
8. Working Paper on Public-Private Partnership 25. Australian Government Assurance Reviews – Enabling Laws Increase Private Investment in Resource Management Guide No. 106, 2017, Infrastructure, Research Institute of Applied Department of Finance, Australian Government Economics 26. Risk Potential Assessment Tool – Resource 9. Infrastructure Finance in the Developing World Management Guide No. 107, Department of - Infrastructure Pipeline and Need for Robust Finance, Australian Government Project Preparation, Global Green Growth 27. Guidance for the Two Stage Capital Works Institute, June 2015 Approval Process for Australian Government 10. Global Infrastructure Outlook, GI Hub Construction Projects - Resource Management Guide No. 502, Department of Finance, Australian 11. PPP Tools, PPP Knowledge Lab Government 12. PPP Policy, Legal and Institutional Frameworks 28. Parliamentary Standing Committee on Public in Asia and the Pacific, UNESCAP Works – Procedure Manual, 2018, The Parliament 13. Public Private Partnership Units - What They Do, of the Commonwealth of Australia The World Bank 29. Victoria’s 30-year Infrastructure Strategy, 2016, Infrastructure Victoria
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30. Infrastructure Victoria Annual Report 2017-18 47. The Sino-Brazilian Principles in a Latin American and Brics Context: The Case for Comparative 31. Investment Lifecycle and High Value/High Risk Public Budgeting Legal Research, Gutemberg P. Guidelines, Department of Treasury and Finance, Lopes Jr, 2015 Government of Victoria 48. Lessons Learned and Best Practices in Public- 32. Infrastructure NSW Annual Report 2016-17 Private Partnership Projects, Ramon Espelt, 33. NSW Infrastructure Pipeline Multilateral Investment Fund, April 2015
34. State Infrastructure Strategy, 2018, Infrastructure 49. Pre-investment in Infrastructure in Latin America NSW and the Caribbean, Juan Alberti, 2015, the Inter- American Development Bank. 35. Infrastructure Investor Assurance Framework, 2016, Infrastructure NSW 50. https://contas.tcu.gov.br/ pesquisaJurisprudencia/#/ 36. Contingency Management Guidebook, 2014, detalhamento/11/2834320174. Infrastructure NSW PROC%2520/%2520/DTRELEVANCIA%2520d Brazil esc%252C%2520NUMACORDAOINT%2520de sc/false/2/false - Review of the South Highway 37. Plano Plurianual 2016-2019, Ministry of Planning, Integration program by the Federal Court of Development and Management Accounts (TCU)
38. Back to Planning: How to Close Brazil’s 51. http://www.planejamento.gov.br/ - Website of the Infrastructure Gap in Times of Austerity, World Ministry of Planning, Budget and Management Bank Group, July 2017 52. https://www.ppi.gov.br/projeto-crescer-english - 39. Structuring of projects in infrastructure: Website of the Investment Partnership Program international experience and lessons for Brazil, (PPI) Brazil Fernando Camacho and Bruno Rodrigues, 2015 53. https://www.epl.gov.br/ - Website of the Brazilian 40. Procedimento de manifestação de interesse nos Company of Planning and Logistics (EPL - estados, PPP Brasil, Pereira, B. R, 2013. Empresa de Planejamento e Logística S.A.)
41. Fiscal Space and Public Sector Investments 54. https://www.ontl.epl.gov.br/ - Website of the in Infrastructure: A Brazilian Case Study, José National Transport and Logistics Observatory, Roberto Rodrigues Afonso, Erika Amorim Araújo, EPL Geraldo Biasoto Júnior, January 2015 55. Presentation – Reducing Bottlenecks in 42. An Overview of the Brazilian PPP Experience from Infrastructure – Innovative Platforms for Project a Stakeholder’s Viewpoint, Cesar Queiroz, Gaston Preparation Facilities, BNDES, 2015 Astesiano and Tomas Serebrisky, the Inter- 56. Presentation – 1st Road show BR-386/RS, BR- American Development Bank, March 2014 448/RS, BR-290/RS, BR-101/RS – PPI, EPL, ANTT, 43. National Infrastructure Program 2014-2018 MTPA, July 2018 Analysis and Opportunities, PWC, May 2014 57. Presentation – Financing Infrastructure in 44. Brazil: Improving the appraisal framework for road Brazil – PPP Best Practices and Long-Term transport infrastructure investment – Elements Infrastructure Financing, Diógenes Alvares, for Consideration, Adrien Véron, the World Bank, September 2016 (New Delhi –India) 2010 58. Presentation – Stakeholder presentations 45. EPL – Mapping of process flows, structuring –Concessão De Rodovias Federais BR- of projects - Road sector, KPMG, EPL, 101/290/386/448/SC/RS, ANTT, February 2017 November 2018
46. Brazil Planning for Performance in the Federal Government: Review of Pluriannual Planning Volume I and II, the World Bank, December 2002
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Canada 75. Project Report: Achieving Value for Money Abbotsford Regional Hospital and Cancer Center 59. Public-Private Partnerships: A Tool in the Tool Project, Ministry of Health Services (British Box Report of the Standing Committee on Columbia), February 2005 Government Operations and Estimates, House 76. Capital Asset Management Framework of Commons, March 2013 Guidelines, Government of British Columbia, May 60. Alberta’s Public-Private Partnership Framework 2002 and Guidelines, Alberta Treasury Board, March 77. Concept Plan Guidance Document, Ministry of 2011 Finance and Partnerships British Columbia, May 61. Infrastructure and Jobs Prosperity Act, 2018 Government of Ontario, 2015 78. Policy on Investment Planning – Assets and 62. Annual Report, Infrastructure Ontario, 2018 Acquired Services, Treasury Board of Canada Secretariat, November 2013 63. 2017 | 2020 Business Plan, Infrastructure Ontario, 2017 79. Standard for Organizational Project Management Capacity, Treasury Board of Canada Secretariat, 64. Infrastructure Planning, Treasury Board March 2011 Secretariat (Government of Ontario) 80. Standard for Project Complexity and Risk, 65. Infrastructure Planning Follow-Up on VFM Treasury Board of Canada Secretariat, March Section 3.07 2015 Annual Report, Treasury 2011 Board Secretariat (Government of Ontario) 81. Policy on the Management of Projects, Treasury 66. Annual Report, Office of the Auditor General Board of Canada Secretariat, March 2011 of Ontario, 2014 82. Policy Framework for the Management of Assets 67. Build On 2017 Infrastructure Update, Ministry and Acquired Services, Treasury Board of Canada of Infrastructure (Government of Ontario), 2017 Secretariat, March 2012 68. Building Better Lives: Ontario’s Long-Term Infrastructure Plan 2017, Ministry of Chile Infrastructure (Government of Ontario), 2017 83. Pre-Investment in Infrastructure Latin America 69. Infrastructure Ontario Alternative Financing and the Caribbean - Case studies from Chile, and Procurement Track Record 2016, Mexico, Peru and Uruguay, Juan Alberti, IDB, 2015 Turner & Townsend, December 2016 84. MINVU Reconstruction Plan - a United Chile 70. Infrastructure Ontario Alternative Financing and Better, Government of Chile, 2010 Procurement Track Record 2017, Hanscomb, 85. Appraisal of Public Investment Document, Chile, December 2017 the World Bank, 2005 71. Infrastructure Ontario: A Key Agency to 86. Presentation on Appraisal of Public Investment Implement the Long-Term Infrastructure Plan, in Practice, Methodical Approaches and Decision Residential and Civil Construction Alliance of Systems, Public Sector Performance-Governance Ontario, September 2017 Global Practice, 2014 72. Investing in Canada, Infrastructure Canada, April 87. The Promise and Peril of PPPs - Lessons from the 2018 Chilean Experience, 2011 73. Public-Private Partnerships What the World 88. A Diagnostic Framework for Assessing Public Can Learn from Canada, Service Works Global/ Investment Management - A Policy Research Canadian Council for Public-Private Partnerships, Working Paper, The World Bank, 2010 February 2015 89. Leveraging PPPs – the project to modernize 74. Management Framework: Assessment, infrastructure, the case of Chile, 2017 Alberta Infrastructure and Transportation, September 2006 90. Evaluating the environment for PPP in Latin America and the Caribbean, Infrascope, IDB, 2017
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91. Review of Experiences with Unsolicited Proposals India in Infrastructure Projects 104. PPP Guide for Practitioners, Ministry of Finance, 92. Gaps and Governance Standards of Public April 2016 Infrastructure in Chile, OECD, 2017 105. Scheme and Guidelines for India Infrastructure 93. Journal of Benefit-Cost Analysis, Department Project Development Fund, Ministry of Finance, of Economics, University of Chile, 2012 2013 94. General Methodology of Preparation and 106. Office Memorandum: Appraisal and Approval Evaluation of Projects, Ministry of Planning, of Public Funded Schemes and Projects (except Studies and Investment Department of matters required to be placed before the Cabinet Investments Committee on Security), August 2016 95. MINVU Reconstruction Plan Document, 107. Compendium of Important Orders/Circulars Government of Chile and Ministry of Housing Regarding Formulation, Appraisal and Approval and Urban Development, 2010 of Government Funded Plan Schemes/Projects 96. Prioritizing Infrastructure Investments - A 108. Guidelines for Formulation, Appraisal and Comparative Review of Applications in Chile Approval of Central Sector Public Private Policy Research Working Paper, the World Bank, Partnership Projects, Ministry of Finance, 2013 2018 109. India PPP Summit 2017 Revival of PPP 97. Presentation on the Capital Budgeting Systems, Momentum in the Transport Sector, FICCI/EY, the Chilean Experience, Edgardo S. Mimica, 2009 July 2017
China 110. Report on Evaluation of Framework of Appraisal of Projects, Indian Institute of Management 98. Planning and Policy Coordination in China’s Bangalore, March 2014 Infrastructure Development - A Background Paper for the EAP Infrastructure Flagship Study, Zhi 111. Guidelines for the Implementation of Planning Liu for ADB-JBIC-World Bank East Asia Pacific Commission’s Project Preparation Facility Infrastructure Flagship Study 112. Schemes and Guidelines for Financial Support 99. Planning Modes for Major Transportation to Public Private Partnerships in Infrastructure, Infrastructure Projects (MTIPs): Comparing China Ministry of Finance, 2013 and Germany, MDPI, September 2018 113. 2015 Ex-Post Evaluation of Japanese ODA Loan 100. Guidebook on PPP Frameworks in APEC Region, Project ‘Delhi Mass Rapid Transportation System Asia Pacific Economic Cooperation, May 2015 Project Phase 2 (I) – (V)’, Yumiko Onishi (IC Net Limited), 2015 101. A Review on the Project Appraisal Processes and Major Public Investments in China, Wenting Chen 114. Breaking Ground A Narrative on the Making of Delhi Metro, Yumiko Onishi/JICA, 2016 102. Analysis of Assessment of Regional and Local Government and Planning Strategies – Hangzhou 115. Promoting Low Carbon Transport in India Case Study, PLUREL, November 2008 Case Study of Metro Rails in Indian Cities, Transportation Research and Injury Prevention 103. Public-Private Partnership 2019, Law Business Programme – IIT Delhi, June 2014 Research, September 2018 116. Delivery Note - The Delhi Metro: Effective Project Management in the Indian Public Sector, JICA, May 2017
117. Website of Department of Economic Affairs, Ministry of Finance
118. Website of National Highways Authority of India
119. Website of Project Monitoring Group
120. Website of PPP Toolkit
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Indonesia 140. Project Information Document Nairobi Toll Road project, KeNHA 121. Executing and Developing PPP Projects – 141. Framework for the Management of Fiscal An Indonesian Experience, Ministry of Finance, Commitment & Contingent Liabilities in PPPs, October 2018 the National Treasury 122. Presidential Regulation Number 38 of 2015 Mexico 123. PPP Book 2018, BAPPENAS 142. Programa Nacional de Infraestructura 2014-2018, 124. PT SMI Annual Report, 2017 SHCP Mexico 125. IIGF Annual Report, 2017 143. National Infrastructure Program 2014-2018 126. BAPPENAS Regulation Number 4 of 2015 Analysis and Opportunities, PWC, May 2014
127. Key Improvements in Infrastructure Delivery 144. Lessons Learned and Best Practices in Public- in Indonesia, KPPIP, August 2017 Private Partnership Projects, Ramon Espelt, Multilateral Investment Fund, April 2015 128. KPPIP Report, 2nd Semester, Period July 2017 – December 2017 145. Pre-investment in Infrastructure in Latin America and the Caribbean, Juan Alberti, 2015, Inter- 129. Investment Opportunities in PPP Infrastructure, American Development Bank. Indonesia Investment Coordinating Board, May 2014 146. Private Solutions for Infrastructure in Mexico, World Bank and Public-Private Infrastructure Kenya Advisory Facility (PPIAF), 2003
130. Draft Public Investment Management Guidelines, 147. https://www.proyectosmexico.gob.mx/en/ MINECOFIN, August 2018 projects-hub/ - Website of the Mexico Projects Hub 131. Improving Transparency and Accountability in PPPs - Disclosure Diagnostic Report, The World 148. https://www.fonadin.gob.mx/productos-fonadin/ Bank - Website of the National Infrastructure Fund, FONADIN 132. Implementation Status & Result Report - Kenya Infrastructure Finance/PPP project, The World 149. Operational Regulations, FONADIN Bank, 2018 150. Project Appraisal Document – Proposed Loan 133. Kenya PPP Programme Status Report, PPP Unit, from the Clean Technology Fund to BANOBRAS, 2018 World Bank 2010
134. Policy Statements on PPPs, Ministry of Finance, 151. United Mexican States Mexico Public Expenditure 2011 Review, World Bank, 2016
135. The PPP Act, Republic of Kenya, 2013 152. An Evaluation of Mexican Transportation Planning, Finance, Implementation, 136. Presentation on Transaction Advisory Services and Construction Processes, Center for for Nairobi-Nakaru Mau-Summit Highway, The Transportation Research at The University of National Treasury/Kenya National Highways Texas at Austin, 2009 Authority 153. Improving the Practice of Transport Project 137. Nairobi-Nakaru-Mau Summit-Highway Project Appraisal, ITF Round Tables, No. 149, OECD, 2011 Information Memorandum, Republic of Kenya, National Treasury, KeNHA, 2016 154. Presentation – Proyectos para Prestacion de servicios, SHCP, Unidad de Inversiones, 2012 138. The Strategy for Public Financial Management Reforms in Kenya, 2013-2018 155. Presentation – Programa de Apoyo Federal al Transporte Masivo “PROTRAM”, SHCP and 139. The Public Finance Management Act, BANOBRAS, October 2016 MINECOFIN, 2012
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156. Presentation – Programa de Apoyo Federal 172. https://www.deafsluitdijk.nl/documenten/ - al Transporte Masivo “PROTRAM”, SHCP and Documentation on stakeholder consultations, BANOBRAS, November 2013 Afsluitdijk project
157. Presentation – Implementation del SIT – 173. https://www.platformparticipatie.nl/projectenlijst/ OPTIBUS, Municipio de Leon, Guanajuato Afsluitdijk/index.aspx - Phases in project (2015-2018) preparation, Afsluitdijk project
158. A critical look at major bus improvements in Philippines Latin America and Asia: Case study Optibus, Leon, Guanajuato, Mexico, Dario Hidalgo, 2007 174. The Public-Private Partnership Program, PPP Center Netherlands 175. Public-Private Partnership Governing Board 159. Establishing and Reforming PPP Units Analysis Resolution No. 2015-09-01, PPP Center, August of EPEC Member PPP Units and Lessons Learnt, 2015 European PPP Expertise Centre, August 2014 176. Public-Private Partnership Governing Board 160. Quality Assurance of Major Public Infrastructure Resolution No. 2016-06-02, PPP Center, June Projects in Cyprus, Norwegian University of 2016 Science and Technology, June 2017 177. Public-Private Partnership Governing Board 161. MIRT, Exploration and Plan Elaboration, Guidelines on the Identification, Selection, and Rijkswaterstaat, June 2017 Prioritization of Public-Private Partnership (PPP) Project, PPP Center, March 2015 162. Front-End Project Governance Choice of Project Concept and Decision-Making – An International 178. Operations Manual, PPP Center, December 2015 Perspective, Norwegian University of Science and 179. Developing PPP Projects for Local Government Technology, September 2013 Units, PPP Center, 2012 163. Annual Report, Rijkswaterstaat, 2017 180. Public-Private Partnership Stories: NAIA 164. MIRT Overzicht, Ministry of Infrastructure and Expressway, IFC/AusAid, August 2013 Water Management, 2017 181. Summary of Good Practice of Successful Project 165. MIRT Overzicht, Ministry of Infrastructure and Preparation Facilities, Global Infrastructure Water Management, 2018 Basel Foundation (GIB)/Global Fund for Cities Development/Local Governments for 166. MIRT Overzicht, Ministry of Infrastructure and Sustainability, February 2018 Water Management, 2019 182. Philippines: Strengthening Public–Private 167. Summary: The Dutch Multi-Year Programme for Partnerships in the Philippines, Asian Infrastructure, Spatial Planning and Transport Development Bank, March 2012 (MIRT), Ministry of Infrastructure and Water Management, February 2018 183. Joint Circular No. 2016-01 Policy Guidelines and Procedures for the Formulation of the Three Year 168. Market Involvement throughout the Planning Rolling Infrastructure Program, Department of Lifecycle, Lenferink, Sander, 2013 Budget and Management/National Economic and 169. Public-Private collaboration: How private Development Authority, January 2016 involvement can contribute to network 184. Guidelines for the Updating of the 2017-2022 performance, Programme Committee of the Public Investment Program (PIP) as the Input Transport Research Arena, 2012 to the FY 2020 Budget Preparation, National 170. Evaluatie marketverkenning Afsluitdijk (Evaluation Economic and Development Authority, September and Market reconnaissance Afsluitdijk), Lenferink, 2018 Struiksma, Sukkar, Oldenkamp, 2009 185. Guidelines on the Utilization of the Project 171. Review Rapportages Fase 2 in Het Kader Van Development and other Related Studies (PDRS) De Marktverkenning Afsluitdijk, J.K. Vrijling, W. Fund, National Economic and Development Kanning, January 2009 Authority
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186. Guidelines on the Utilization of the Feasibility 201. Public–Private Partnership Infrastructure Studies (F/S) Fund, Department of Budget Projects: Case Studies from the Republic of Korea and Management/National Economic and Volume I and II, Asian Development Bank, 2011 Development Authority, 2014 202. Private participation in the infrastructure 187. Joint Circular No. 2017-01 Implementation programme of the Republic of Korea, Junglim Guidelines for the Establishment of the Hahm, Transport and Communications Bulletin Project Facilitation, Monitoring, and Innovation for Asia and the Pacific, 2003 (PFMI) Task Force, Department of Budget 203. Effective Implementation of BTL Projects in and Management/National Economic and Korea, Korea Development Institute, 2005 Development Authority, September 2017 204. http://pimac.kdi.re.kr/study/study_list.jsp?pageNo 188. National Government Agency Public-Private =4&showListSize=10&classcd=F1 – Partnership Manual Volume 1, PPP Center, August 2014 205. Presentation – Managing PPP in Korea through A Think Tank Institution, Jay-Hyung Kim, KDI 189. Operations Manual on the ICC Approval Process PIMAC, OECD Second Annual Meeting on Public and ICC Secretariat Appraisal of New and Private Partnerships, 2009 Ongoing Purely Government-Funded Programs and Projects, The Investment Coordination 206. Presentation – PPP Units and PIMAC of Korea, Committee Secretariat, November 2015 Dr. Hojun LEE, PIMAC, November 2014
190. Project Development and Monitoring Facility 207. Presentation – Government Support for PPP (PDMF) Guidelines, PPP Center, October 2011 Projects in Korea, Hyeon Park, PIMAC, November 2012 191. Assessment of Planning and Programming for Capital Projects at the National and Agency 208. Presentation – Towards More Efficient Public Levels, Philippine Institute for Development Investment Management, PIMAC, November Studies, December 2017 2015
192. Formulation of the 2017-2022 Public Investment 209. Presentation – Public-Private Partnership Program (PIP), National Economic and in Korea, KDI School of Public Policy and Development Authority, January 2017 Management
193. Identification, Selection and Prioritization of PPP Rwanda Projects, PPP Center, September 2012 210. National Investment Policy, MINECOFIN, 2017 194. Policy Brief Unsolicited Proposals, PPP Center, September 2012 211. PPP Law, May 2016
195. Assessment of the Effectiveness of Project 212. PPP Guidelines, July 2018 Preparation Facilities in Asia, G20 Development 213. Rwanda Vision 2020, MINECOFIN Working Group, September 2014 214. Public Procurement User Guide, MINECOFIN Republic of Korea 215. Annual Report, PIDG, 2015 196. The Budget System of Korea, Ministry of 216. Feasibility Studies Guidelines, LODA, 2015 Economy and Finance 217. The First Planning and Budgeting Call Circular, 197. Annual Reports, KDI 2008 to 2016 MINECOFIN, 2019-2020 198. International Infrastructure Governance Report, 218. PPIAF Pipeline Priority Activities, FY15, Q1 National Infrastructure Commission, June 2017 219. Project Brief Kigali Bulk Water Supply project, 199. The Republic of Korea: PIM Reform after the African Development Bank, 2010 Financial Crisis, Jay Hyung-Kim, The World Bank, 2012 220. Case Studies for Policy Makers, Sub Saharan Africa, 2017 200. Capital Planning Guidelines, National Treasury of South Africa, 2017 221. Rwanda Country Diagnostic Report, The World Bank, 2016
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243. The Evolution of State Owned Enterprises 222. Enabling Infrastructure Investment - in South Africa, Edwin Ritchken, 2014 Kigali Bulk Water Supply, PPIAF, 2015 244. Finding the pipeline – Project preparation for 223. Kigali Bulk Water Project, IFC, DevCo sustainable infrastructure, Overseas Development 224. MINECOFIN Website Institute, 2016
225. PPP Knowledge Lab, Rwanda 245. Making It Happen: Selected Case Studies of Institutional Reforms in South Africa, World Bank, 226. RDB Website Asad, Renosi Mokate, and Kathrin A. Plangemann, 227. PPPI, The World Bank, Rwanda editors, 2016
228. Infracompass, Country Profile, GI Hub 246. Unsolicited Infrastructure Proposals: How Some Countries Introduce Competition and 229. MININFRA Website Transparency – An International Experience South Africa Review, John T. Hodges, Georgina Dellacha, PPIAF, January 2007 230. National Development Plan 2030, National 247. Unsolicited Proposals – An Exception to Public Treasury of South Africa, August 2012 Initiation of Infrastructure PPPs – An Analysis of 231. National Infrastructure Plan, Presidential Global Policies and Lessons Learned, PPIAF, June Infrastructure Coordinating Commission, 2012 2014
232. Integrated Resource Plan for Electricity 2010- 248. https://www.republikein.com.na/main/print_ 2030 post/experts-share-ppp-lessons-from-south- africa2017-11-16/ - Article on PPPs in South 233. Capital Planning Guidelines, National Treasury Africa of South Africa, 2017 249. http://www.treasury.gov.za/ - Website of the 234. Framework for Strategic plans and Annual National Treasury of South Africa performance plans, National Treasury of South Africa, August 2010 250. https://www.gtac.gov.za/ - Website of the Government Technical Advisory Center, within 235. Circular on Standardized approach in reporting National Treasury provincial infrastructure projects, National Treasury of South Africa 251. Presentation – National Treasury Workshop – Standard for Infrastructure Procurement and 236. Guidelines on Budget Submissions for Large Delivery Management (SIPDM) Strategic Infrastructure Proposals, National Treasury of South Africa, May 2018 252. Presentation – Presentation on the Independent Power Producer Procurement programme, 237. National Treasury Annual Reports (latest) Portfolio Committee on Energy, March 2018 238. GTAC Annual Reports (latest) 253. Presentation – Progress on the development and 239. South Africa’s Renewable Energy IPP rollout of the Budget Facility for Infrastructure to Procurement Program: Success Factors and Parliament, National Treasury South Africa, March Lessons, PPIAF, Anton Eberhard, Joel Kolker, 2018 and James Leigland, May 2014 254. Presentation – Infrastructure Project Appraisal 240. Auctions for Renewable Energy Support in South – Principles for getting value for money in Africa: Instruments and Lessons Learnt, AURES, infrastructure, GTAC, November 2016 March 2016 255. Assessment of Project Preparation Facilities 241. Renewable energy auctions: Cases from sub- for Africa, Secretariat of the Infrastructure Saharan Africa, International Renewable Energy Consortium for Africa, 2012 Agency, Abu Dhabi IRENA, 2018
242. Quarterly report – Independent Power Producers Procurement Programme (IPPPP) An Overview – June 2018
258 | GLOBAL INFRASTRUCTURE HUB RELEVANT LITERATURE
United Kingdom
256. Treasury Approvals Process for Programmes and Projects, HM Treasury, November 2016
257. IPA Annual Report, 2018
258. Department of Transport Annual Report, 2018
259. PFI and PF2, National Audit Office, January 2018
260. The Green Book
261. Supplementary Green Book Guidance, HMT
262. Guide to Implementing Integrated Assurance, HMT
263. Public Sector Business Cases Using The Five Case Model: Guidance, Templates, HMT
264. Guide to Choosing an Infrastructure Projects and Authority Assurance Review, HMT, July 2017
265. Managing Public Money, HMT
266. Contingent Liability Approval Framework, July 2018, HMT
267. Project Initiation Routemap Handbook, HMT
268. Analysis of the National Infrastructure and Construction Pipeline, IPA, December 2017
269. National Infrastructure Delivery Plan, IPA, March 2016
270. National Infrastructure Assessment, NIC, July 2018
271. Transforming Infrastructure Performance, IPA, December 2017
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 259 APPENDIX D
Appendix D: List of organisations contacted
Name of the Stakeholder Designation Institution
Australia
1. Simon Phemister Former Deputy Secretary, Economic Department of Premier and Cabinet Policy and State Productivity
2. Kevin Doherty CEO Department of Treasury and Finance Victoria
3. David Webster Deputy Secretary, Commercial Department of Treasury and Finance Division Victoria
4. Jason Loos Executive Director Department of Treasury and Finance Victoria
5. Jim Betts CEO Infrastructure NSW
6. Michel Masson CEO Infrastructure Victoria
7. Anna Chau Acting Chief Executive Infrastructure Australia
Brazil
8. Marco Aurelio Barcelos Legal adviser and former Director PPP Unit of the State of Minas Gerais Silva of the PPP Unit of the State of Minas Gerais
9. Diogenes Eduardo Planning Director EPL Cardoso Alvares
Chile
10. Maria Rossetti National Planning Director Ministry of Public Works
11. Mariana Amelia General Director of Public Works Ministry of Public Works Concha Mathiesen
260 | GLOBAL INFRASTRUCTURE HUB LIST OF ORGANISATIONS CONTACTED
Name of the Stakeholder Designation Institution
Canada
12. Lisa Mitchell Senior Director Infrastructure Canada
13. Glen Campbell Assistant Deputy Minister, Investment, Infrastructure Canada Partnerships and Innovation
14. Andrea Roberts Manager, Infrastructure Finance Ontario Ministry of Infrastructure Policy Unit
India
15. Mrutyunjay Bihara Director Infrastructure Ministry of Finance
16. Sanjana Kadyan Assistant Director Ministry of Finance
Indonesia
17. Wimsana Adi Facilities and Infrastructure Deputy BAPPENAS (Indonesian Ministry of National Suryabrata Development Planning)
18. Sri Bagus Guritno Director BAPPENAS (Indonesian Ministry of National Development Planning)
19. Emma Sri Martini President Director PT SMI
20. Faaris Pranawa Director PT SMI
21. Darwin Trisna Project Development and Advisory PT SMI Djajawinata Director, Head of Investor Relation Unit, Directorate
22. Farid Wibowo General of Budget Financing and Risk Ministry of Finance Management
23. Rainer Haryanto Program Director KPPIP
24. Salsura Satria Executive Director of Finance and IIGF Project Assessment
Kenya
25. Charles Ndambuki Senior Economist Ministry of Finance Kenya
26. Kaara Wainaina External Affairs Expert PPP Unit, National Treasury of Kenya
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 261 APPENDIX D
Name of the Stakeholder Designation Institution
Mexico
27. Santiago Creuheras Director General for Energy Efficiency Secretaria De Energia and Sustainability
28. Irma Puente Deputy Director of Studies and FONADIN Technical Evaluation
Netherlands
29. Jan van Schoonhoven Senior Advisor INFRASTRUCTURE and PPP Netherlands Government
30. Farid Bouchdak Purchaser and Managing Contractor Rijkswaterstaat
31. Obbe Wassenaar Strategic Consultant Angle of View, Advies
Philippines
32. Roderick M. Planta Assistant Secretary and Concurrent The National Economic and Development Director Authority
33. Michelle Sebistina Project Development and Monitoring PPP Centre of the Philippines Facility Service
Rwanda
34. Moses Asiimwe Head of Strategic Investment Division Rwanda Development Board
35. Innocent Bajiji Acting CEO Rwanda Development Board
36. Jackson Mughisha PPP Specialist Local Administrative Entities Development Agency
37. Oscar Nzirera Capacity Building Expert Rwanda Association of Local Government Authorities
38. Kaara Wainaina External Affairs Expert Local Administrative Entities Development Agency
39. Charles Kalinda Director, National Investment Planning Ministry of Finance and Economic Planning & Project Quality Assurance
262 | GLOBAL INFRASTRUCTURE HUB LIST OF ORGANISATIONS CONTACTED
Name of the Stakeholder Designation Institution
South Africa
40. James Aiello Transaction Advisory Services GTAC and PPP
41. Elsa Strydom Senior Project Advisor National Treasury of South Africa
The Republic of Korea
42. Hyeon Seok Park Deputy Director, PPP Policy Division Ministry of Economy and Finance
43. Okju Lee Deputy Director, PPP Policy Division Ministry of Economy and Finance
44. Jaehyuk Ahn Deputy Director, Road Policy Division Ministry of Land, Infrastructure and Transport
45. Takkyung Kim| Head, Policy Research Team Korea Development Institute, Public and Private Infrastructure Investment Management Center
United Kingdom
46. James Bowler Director General, Public Spending HM Treasury
47. Alex Barton Policy Advisor Infrastructure and Projects Authority
48. Karineh Grigorian Commercial Manager, International Infrastructure and Projects Authority
49. Phil Graham Chief Executive National Infrastructure Commission
50. Anthony Boucher Deputy Director, Roads Devolution and Department of Transport Motoring
51. Matthew Lodge Director and Head of Project Delivery Department of Transport Profession - Rail
Leading Practices in Governmental Processes Facilitating Infrastructure Project Preparation | 263 APPENDIX E
Appendix E: Consultant team
Mr. Pratyush Prashant – Team Leader ABOUT CRISIL LIMITED AND CRISIL INFRASTRUCTURE ADVISORY Mr. David Baxter – PPP Expert (Europe and Latin America) CRISIL Limited is a leading, agile and innovative global analytics company driven by its mission of making Mr. Anand Madhavan – Project Director markets function better. It is India’s foremost provider and PPP Expert (Asia and Africa) of ratings, data, research, analytics and solutions, with Mr. SM Sundarajan – Analyst a strong track record of growth, culture of innovation Ms. Shikha Parekh – Analyst and global footprint. It has delivered independent opinions, actionable insights, and efficient solutions Ms. Ayushi Gupta – Analyst to over 100,000 customers. It is majority owned by Mr. Rohan Teli – Analyst S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
CRISIL Infrastructure Advisory is a leading advisor to regulators and governments, multilateral agencies, investors, and large public and private sector firms. It helps shape public policy and enable infrastructure development. Its services span a wide array of infrastructure development activities, and its work in the areas of policy formulation, regulation, design and implementation of public-private partnership (PPP) frameworks and infrastructure financing mechanisms helps create a vibrant ecosystem for infrastructure development. CRISIL Infrastructure Advisory’s services at the project level include bid process management, valuations and due diligence to enable investment decisions, and it is known for its core values of independence and analytical rigor combined with deep domain expertise. Its teams have expertise across the complete range of infrastructure sectors – urban development, energy, transport and logistics, natural resources, education, and healthcare. It has a rich understanding of PPP and financing related issues and operates in India and 22 other emerging economies in Asia, Africa, and the Middle East. CRISIL Infrastructure Advisory is a division of CRISIL Risk and Infrastructure Solutions Limited, a wholly owned subsidiary of CRISIL Limited.
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